NextFin news, On Thursday, October 9, 2025, the US dollar slid as investor confidence was shaken by the ongoing US government shutdown and dovish signals from the Federal Reserve, which fueled bets on upcoming interest rate cuts. The US Dollar Index dropped to around 99, its lowest level since early August, reflecting the cautious market sentiment.
The US government shutdown entered its ninth day with no resolution in sight, as the Senate failed to advance funding bills, prolonging uncertainty and raising concerns about the economic impact. This political impasse contributed to the dollar's decline as investors weighed the risks to the US economy.
Meanwhile, minutes from the Federal Reserve's September meeting revealed near unanimity among policymakers in favor of lowering interest rates, with markets pricing in a 93% chance of a 25 basis point cut in October and a 79% chance of another cut in December, according to the CME FedWatch tool. This dovish stance pressured the dollar further and supported gains in other currencies.
Major currency pairs responded accordingly. The GBP/USD pair extended its drop toward 1.3350, flirting with two-week lows, as renewed US dollar strength and a cautious risk tone weighed on the British pound. Similarly, the EUR/USD pair lost recovery momentum, turning lower toward the 1.1600 level amid fresh demand for the US dollar as a safe haven.
Market participants are closely watching for Federal Reserve Chair Jerome Powell's speech scheduled later on Thursday, which is expected to provide critical insights into the Fed's future monetary policy direction and influence currency markets. Powell's remarks are anticipated to clarify the timing and extent of potential rate cuts, which remain a key driver of market sentiment.
In addition to the Fed's outlook, geopolitical developments such as the Israel-Hamas peace deal have eased some safe-haven demand, impacting assets like gold, which struggled to maintain gains above the $4,000 psychological mark. The strengthening US dollar also exerted downward pressure on gold prices.
Overall, the US dollar's slide on Thursday reflects a combination of political uncertainty in Washington, dovish Federal Reserve expectations, and shifting risk sentiment among investors. The market awaits further clarity from Fed Chair Powell's remarks to gauge the trajectory of US monetary policy and its implications for global currency markets.
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