The dollar was lower against the euro and the yen on Friday as uncertainty ahead of a looming U.S. government shutdown and a lack of clarity over the direction of U.S. monetary policy weighed. The dollar fell against the euro and the yen, as well as the Swiss franc, amid concerns that political wrangling in Washington could lead to a government shutdown and create a drag on fourth quarter economic growth.
Congress must pass a short-term budget by midnight on Monday in order to avoid a government shutdown. Republican opposition to the funding of the Affordable Care Act has created a standoff with the White House and the Democratic-controlled Senate, which have both said they will not support any budget bill that defunds or amends Obamacare. Later this month, Congress will have to extend the U.S. debt ceiling which the U.S. Treasury Department has estimated will be reached by October 17.
USD/JPY hit session lows of 98.10 on Friday, the lowest since September 19, before settling at 98.24, down 0.78% for the day and ending the week 0.50% lower.
EUR/USD rose to session highs of 1.3564, the highest since September 19, before paring back gains to settle at 1.3522, 0.24% higher for the day. For the week, the pair was 0.19% higher.
The dollar fell to seven-month lows against the Swiss franc, with USD/CHF hitting session lows of 0.9022, before trimming losses to settle at 0.9062, 0.47% lower for the day and ending the week 0.47% lower.
Elsewhere, the pound rose to almost eight-month highs against the dollar on Friday after Bank of England Governor Mark Carney said he saw no further case for quantitative easing.
In an interview with the Yorkshire Post newspaper, Carney said the BoE would consider additional stimulus measures if necessary, "but my personal view is, given the recovery has strengthened and broadened, I don't see a case for quantitative easing and I have not supported it."
GBP/USD hit session highs of 1.6147, the highest since September 19, before settling at 1.6138, 0.61% higher for the day and extending the week's gains to 0.62%.
In the week ahead, investors will be focusing on Friday's U.S. nonfarm payrolls report, for indications on whether the economic recovery is sufficiently strong for the Fed to start rolling back its stimulus program.
Markets will also be watching developments in U.S. budget negotiations.
Meanwhile, interest rate decisions by the European Central Bank, the Bank of Japan and the Reserve Bank of Australia will be closely watched. Ahead of the coming week, Investing.com has compiled a list of these and other significant events likely to affect the markets.
Monday, September 30.
New Zealand is to release data on building consents, an excellent indicator of future construction activity. Australia is to publish data on private sector credit.
Japan is to release a series of economic data, including reports on housing starts, retail sales and industrial production.
China is to publish the final reading of the closely watched HSBC manufacturing PMI. The U.K. is to produce data on net lending to individuals and mortgage approvals. The euro zone is to release preliminary data on consumer price inflation, which accounts for the majority of overall inflation.
Later in the day, Canada is to publish its monthly report on gross domestic product, the broadest indicator of economic activity and the leading measure of the economy's health. The U.S. is to release a report on manufacturing activity in Chicago.
Tuesday, October 1
Japan is to release data on household spending and average cash earnings, as well as reports on manufacturing and service sector activity. Markets in China are to remain closed for a national holiday. Beijing is to release data on manufacturing activity, a leading indicator of economic health.
The RBA is to announce its benchmark interest rate. The rate announcement is to be accompanied by the bank's rate statement, which contains important insights into current and future economic conditions from the bank's perspective. Australia is also to produce official data on retail sales, the government measure of consumer spending, which accounts for the majority of overall economic activity. Switzerland is to release its SVME purchasing managers' index, a leading indicator of economic health.
The euro zone is to publish data on the unemployment rate, while Spain and Italy are to release data on manufacturing activity. Germany is to release official data on the change in the number of people unemployed, a leading economic indicator. The U.K. is to produce data on manufacturing activity, a leading economic indicator. In the U.S., the Institute of Supply Management is to produce a report on manufacturing activity, a leading economic indicator.
Wednesday, October 2
Markets in China are to remain closed for a national holiday.
Australia is to publish data on building approvals and the trade balance, the difference in value between imports and exports.
Spain is to release official data on the change in the number of people unemployed. The U.K. is to publish data on construction activity, a leading indicator of economic health. The ECB is to announce its benchmark interest rate. The announcement is to be followed by what will be a closely watched press conference with President Mario Draghi. The U.S. is to release the ADP report on nonfarm payrolls, which leads the closely watched government report by two days.
Thursday, October 3
Markets in China are to remain closed for a national holiday.
The euro zone is to release data on retail sales, while Spain and Italy are to release data on service sector activity. Markets in Germany will be closed for a national holiday. The U.K. is to release data on service sector activity, a leading economic indicator. Later Thursday, the U.S. is to release the weekly government report on initial jobless claims along with data on factory orders. Meanwhile, the ISM is to produce a report on non-manufacturing activity, a leading economic indicator.
Friday, October 4
Markets in China are to remain closed for a national holiday.
The BoJ is to announce its benchmark interest rate and publish its rate statement, which outlines economic conditions and the factors affecting the monetary policy decision. The rate announcement is to be followed by a press conference. Germany is to release data on producer price inflation. Canada is to publish its Ivey PMI. The U.S. is to round up the week with the closely watched government report on nonfarm payrolls, the unemployment rate and average hourly earnings.