US government shutdowns and US Dollar implications

Wells Fargo Research Team Wells Fargo

Summary

A potential U.S. government shutdown that could start October 1st looms, the chances of which are more or less seen as a coin flip at this point. Should a shutdown transpire, there could be a negative impact of the U.S dollar, albeit one that is likely to be modest and short-lived. Recent history suggests the U.S. dollar index (DXY) could fall by around 1%-1.5% in the several weeks following the start of the shutdown. Also in recent shutdown episodes, three months after the shutdown began the dollar had recovered its losses and there was no meaningful or long-lasting impact on the dollar. In the event a U.S. government shutdown does occur, we would expect a similar pattern to unfold, and we would not make significant changes to our longer-term outlook for the U.S. dollar.

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Wells Fargo Research Team

Wells Fargo

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