The US Dollar remained stable on Tuesday as markets weighed the risk of a potential US government shutdown, which could delay this week’s monthly jobs report.

Investor attention is firmly on the looming shutdown, with government funding set to expire at midnight on Tuesday unless Republicans and Democrats reach a last-minute temporary spending agreement.

The US Labor and Commerce departments warned that their statistics agencies would suspend economic data releases, including key September employment figures, if a partial government shutdown occurs.

The payrolls report, vital for Federal Reserve policymakers, is set for Friday, and any delay could leave the central bank without critical labour market insights, Reuters reports.

Traders are now factoring in 42 basis points of Federal Reserve easing by December, and a total of 104 basis points by the end of 2026, around 25 basis points lower than mid-September expectations.

If the government shutdown is short-lived, the Fed is expected to largely disregard its impact. However, a shutdown lasting more than two weeks would heighten downside risks to growth and make a more accommodative Fed policy increasingly likely.

The Dollar faced pressure amid rising political uncertainty in the US. The Dollar index, which has dropped nearly 10% so far this year, was down 0.1% on the day at 97.785.

The biggest losses came against traditional safe-haven currencies with lower yields, such as the Japanese Yen and Swiss Franc.

The Yen recovered from overnight weakness, leaving the Dollar down 0.4% at 148.02 yen. Investors focused on the Bank of Japan’s summary of opinions from its September meeting, where officials discussed a potential near-term rate hike. Markets currently assign a 60% probability to a December increase.

The Dollar has been weighed down by the growing risk of a US government shutdown and declining oil prices since the weekend, while the Yen has emerged as the strongest performer.

A weaker Dollar against the Yen could remain the preferred trade during the shutdown. The pair fell 1.5% during the 2018–19 shutdown and is currently trading about 1% above its short-term fair value.

The Swiss Franc strengthened, driving the Dollar down 0.2% to 0.796 Francs, while remaining steady against the Euro at 0.9347 and holding its value versus the Pound.

In Europe, Sterling shrugged off data showing Britain’s economy grew 0.3% between April and June, even as the current account deficit widened to £28.939 billion in Q2, well above the expected £24.9 billion and up from 2.8% of GDP in Q1 2025.

The Pound was up 0.1% at $1.3448 at the time of writing, and slightly weaker versus the Euro, which rose 0.1% to 87.34 pence. The Euro in turn edged higher against the Dollar to $1.1742.