US Dollar May Dodge Sharp Decline After Shutdown. Forecast as of 01.10.2025
Previous shutdowns have ended badly for the US economy and the greenback. However, the US administration and Congress continue to repeat the same mistakes. What will happen to the EURUSD pair this time? Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The share of the US dollar in Forex transactions is growing.
- The US is facing a government shutdown.
- Previous shutdowns hurt the greenback.
- Long trades on the EURUSD pair can be considered with the target of 1.184.
Weekly US Dollar Fundamental Forecast
One might assume that Liberation Day would spark a wave of anti-dollar sentiment. However, its market share in Forex transactions increased to 89.2% from 88.4%. According to the BIS, the volume of trade reached a record high of $9.6 trillion, which is 28% more than in the same period in 2022. The study was conducted in April, when financial markets experienced significant turbulence due to US tariffs. However, three years ago, there was also cause for serious concern due to the outbreak of armed conflict in Ukraine.
Share of US Dollar and Other Currencies on Forex
Source: Bloomberg.
The US dollar encountered significant challenges in 2025. Tariffs hurt the US currency in April, while the ongoing shutdown added to the pressure in September and October. The US government shutdown was a surprise to the investment community, as investors had gotten used to agreements between Democrats and the US President at the last minute. However, the outcome was unfavorable this time, prompting investors and analysts to draw historical parallels.
The previous shutdown occurred at the close of 2018–2019, coinciding with Donald Trump’s first presidential term. The impact of the trade war lasted 34 days and resulted in the loss of 340,000 employees and a 0.4% decline in real GDP in the first quarter of 2019. However, there was no discussion of a complete government shutdown at that time, as many funding programs were preserved. A complete shutdown took place in 2013 and lasted 16 days. As a result, 800,000 people were laid off, and the economy lost 0.6 percentage points at the end of the year.
The dollar’s performance during the initial 35-day period was negative across the board. The greenback lost value amid declining Treasury bond yields due to concerns about a slowdown in US GDP growth.
US Dollar Performance During Shutdowns
Source: Bloomberg.
Barclays believes that history will repeat itself, and the EURUSD pair will surge in response to the government shutdown, which is an additional reason to lower the federal funds rate. This is particularly relevant in light of the US administration’s plans to cut staff and programs initiated by the Democrats. According to Donald Trump, the situation presents numerous advantages, and the US leader should take this action for the benefit of the nation.
Conversely, Commerzbank does not anticipate a substantial shift in the US dollar exchange rate due to the shutdown. None of the adverse effects will be permanent. Governmental efforts to resume activities have been shown to lead to increased economic growth. Despite the delays in publishing data, it was eventually released. In 2018–2019, after an initial rally of the EURUSD pair, it ultimately declined.
Weekly EURUSD Trading Plan
If Congress continues to make the same missteps, the US dollar may also repeat its history. The ongoing shutdown is a factor that could potentially propel the EURUSD pair back above 1.184. However, the question remains: How long will bulls continue to dominate? While the outlook appears favorable, long positions opened at 1.1645 can be kept open.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of EURUSD in real time mode
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