Above: House Speaker Johnson (right) says the spending bill will pass the House relatively quickly. DOD photo by U.S. Navy Petty Officer 1st Class Alexander Kubitza.
The U.S. government could reopen as soon as Wednesday.
The dollar is tipped to lose value as the U.S. government resumes full operations, say analysts.
The U.S. government shutdown is on a path to end as soon as Wednesday after the Senate on Monday passed a temporary funding measure backed by a group of eight centrist Democrats.
"When U.S. government data returns it will support the case for further Fed cuts and a weaker Dollar," says Kamakshya Trivedi, FX analyst at Goldman Sachs.
The legislation now passes to the House of Representatives, where Speaker Mike Johnson said he expects it will pass quickly.
The breakthrough in the Senate came after Democratic moderates reached a deal that dropped the party’s demand to renew expiring Affordable Care Act subsidies.
The reopening of government will allow agencies that compile data on the economy to get back to work and bring to an end a drought of official economic data that has made it hard to discern whether the Federal Reserve has reason to cut interest rates again in December.
Analysts at Commerzbank say the dollar has recently benefited from a lack of U.S. data as a result of the closure of many government agencies.
"This support is now likely to disappear, which is why an end to the shutdown is actually a negative factor for the dollar," says Thu Lan Nguyen, Head of FX and Commodity Research at Commerzbank.
She explains the return of data raises the probability of further rapid interest rate cuts by the Fed as it becomes clear the labour market has continued to weaken, which is something that will concern the Fed.
Numerous Federal Reserve governors have expressed concerns of late about still-high U.S. inflation, which argues against cutting interest rates again in December.
Lowered bets for a December rate cut have bolstered the dollar of late.
However, the Fed will be more concerned by evidence of a deteriorating labour market, which risks triggering enduring disinflationary conditions, as was the case in the years that followed the great financial crisis.
Commerzbank argues the Fed will reckon that it's easier to bring inflation back under control than to fix an unemployment problem.
"I consider the recent (albeit slight) decline in expectations of interest rate cuts to be unjustified and see it more as another argument for a weaker dollar," says Nguyen.