The shutdown of most US federal functions continues into a second week, after Congress failed to agree upon spending bills to keep the government running.
Last week this delayed the publication of the most important piece of economic data in the world, the US payrolls report. Markets took it in stride, however, as stocks continued to print at record highs and Treasury rates were steady. The dollar edged lower against most of its peers, albeit losses were largely contained. Indeed, currency markets traded in some of the tightest ranges we’ve seen all year. The biggest move in the G10 was the yen, which gave back its gains on Monday on news of the right‑wing, pro‑stimulus Takaichi’s victory in the nation ruling party’s leadership election.
Matthew Ryan, Head of Market Strategy at Ebury, said: “With both Democrats and Republicans seemingly dug in, the main question for markets is how long the shutdown can go on before it begins to do real damage, both through the direct economic effects and the delay of key reports and resulting uncertainty. So far, markets remain sanguine. This week’s docket of economic releases would be unusually light even without the shutdown, so currency markets will have little to go on other than watching the headlines on US budget negotiations.”
GBP
The September PMIs of business activity were weaker than expected last week, with the composite index slumping to barely above the key level of 50 that separates growth from contraction. The data suggests that the British economy is now growing at a sluggish sub 1 % rate, even as inflation is stuck at around 4 %. We would describe this as a light form of stagflation: a low growth, high inflation (but also low unemployment) economy.
Matthew Ryan said: “This backdrop is broadly consistent with current sterling levels, but the risk remains that growing concerns over the upcoming Autumn Budget could trigger renewed pressure on UK gilts and the pound.”
The job of balancing the books was made all the more challenging on Friday following OBR’s downgrade of the UK’s productivity forecasts, which has reportedly helped open up a £30 bn gap in the public finances. For now, the pound remains relatively stable, but this could change could markets fear perpetual tax hikes ahead.
EUR
Flash inflation for September printed at 2.2 % in the overall index and 2.3 % for the core subindex; the latter number has been stable now for the past five months. With these numbers and the business activity PMIs consistent with steady but slow expansion, the ECB can afford to sit on 2 % rates for the foreseeable future, in our view. Markets are in broad agreement, with swaps now not pricing in any further cuts for as far as the eye can see.
Meanwhile, the political soap opera in France has delivered yet another absurd sub plot, after Prime Minister Sébastien Lecornu resigned on Monday, a day after President Macron named his new government. French sovereign yields have spiked this morning, as markets place a fresh risk premium on the country’s assets. In the absence of significant economic releases or policy news in the common bloc this week, this will probably be the main domestic development for the euro in the coming days.
USD
Matthew Ryan added: “The government shutdown has deprived markets of critical information on the state of the US economy, and we now have to rely on less conclusive privately generated data, notably the PMI numbers. Last week’s most important data release was the ADP measure of private sector job creation for September, which was bleak and suggested modest job destruction. That said, this measure has often diverged with the more influential BLS payrolls number, and while it was not totally ignored by market participants, its impact on the dollar was relatively contained.”
The absence of Friday’s payrolls data means that the bad taste left from the dismal ADP print will linger, and the longer the impasse continues, the more challenging it will be to get a clear read on the state of the US economy. The Atlanta Fed real‑time forecast for third‑quarter growth points to strong expansion of nearly 4 % annualised, in spite of the undeniable slowdown in job creation, suggesting that the latter is due to shrinking labour supply rather than any collapse in demand for workers.
About Ebury
Ebury is the leading payments specialist that helps small‑ and medium‑sized businesses (SMEs) operate and grow internationally. It is a global fintech company with a comprehensive and tailored offering to enable businesses to make and receive cross‑border payments, open currency accounts, and manage currency risk.
Founded in 2009 by Juan Lobato and Salvador García in London, Ebury now has over 1,800 employees serving more than 21,000 customers across 40 offices in 29 markets. We have capabilities in 130+ currencies. Ebury has grown rapidly and profitably in recent years.
In FY 2025, revenues rose to £286.5 million, and EBITDA grew to £44.9 million. It is regulated by the Dubai Financial Services Authority (DFSA) in the UAE and backed by top‑tier investors, including Banco Santander, who have a majority share ownership.