The US dollar rose against most major currencies on Wednesday, climbing alongside gold in a broad risk-off rally, while both the euro and yen came under pressure.

The US government shutdown entered its second week as Republicans and Democrats continued to prioritize potential political gains over resolving the underlying disputes. Some faint calls for renewed negotiations on healthcare-related issues have emerged, but earlier hopes of ending the shutdown within 11–15 days are fading.

Meanwhile, political uncertainty in Japan intensified following Sanae Takaichi’s weekend victory in the ruling party election. Market attention has now shifted to the Japanese parliament’s (Diet) vote to confirm her appointment as the next prime minister.

However, complications have reportedly emerged in negotiations between the Liberal Democratic Party (LDP) and its coalition partner, Komeito. If this gridlock persists, Takaichi’s political future could be at risk — and alternative leadership options may arise.

This renewed uncertainty drove the USD/JPY pair above 151.93 for the first time since February 14, prompting speculation that verbal interventions could return to curb yen weakness.

Analysts believe that if the LDP–Komeito negotiations succeed and parliament formally confirms Takaichi as prime minister, the dollar’s upward momentum against the yen could partially reverse.

By 11:44 GMT, the US dollar index had risen 0.3% to 98.8, after hitting a session high of 98.9 and a low of 98.5.

Macron Seeks an Exit from France’s Political Crisis

In France, the situation remains equally complex as President Emmanuel Macron continues to search for a viable resolution to the ongoing political turmoil.

If the latest efforts by outgoing Prime Minister Sébastien Lecornu to form a new government fail, early parliamentary elections may become the default scenario.

However, a newly elected but fragmented parliament would likely prolong the current deadlock.

French sovereign bonds remain under pressure, with 10-year yields trading near Italian levels — about 85 basis points above German Bunds.

Speculation is growing that the continued instability could lead to early presidential elections. Macron, who cannot seek re-election in 2027, is believed to be weighing a strategic move to preserve his political influence, potentially setting the stage for a comeback in 2032 — a plan that could begin taking shape as early as 2026.

Gold and Dollar Benefit from Global Uncertainty

Gold has been one of the biggest winners amid recent political and financial turbulence, surpassing $4,000 per ounce and hitting a record high of $4,040. This pushed year-to-date gains to roughly 53%.

However, some analysts warn that gold’s dramatic outperformance — as the world’s leading safe-haven asset — could signal distortions in global market dynamics.

At the same time, the US dollar has continued its broad advance this week, reflecting a classic flight-to-safety pattern as cryptocurrencies reversed their recent rally.

US equities, meanwhile, traded with relative calm, supported by persistent investment flows into artificial intelligence, which have helped temper investor anxiety.

Still, several strategists note that a short-term correction in major US indices remains possible, particularly if the government shutdown drags on. Ironically, a few negative trading sessions could provide the political pressure needed to restart funding negotiations.

Busy Calendar Despite Lack of US Data

With key economic data releases halted due to the shutdown, market focus today turns to Federal Reserve officials’ remarks and the minutes of the September Federal Open Market Committee (FOMC) meeting.

At least four Fed members — most of them hawkish — are expected to speak later today. The absence of dovish language could weigh on fragile market sentiment.

Nevertheless, markets are already pricing in a 95% probability of a 25-basis-point rate cut in late October. This suggests that even if the meeting minutes lean hawkish, traders may largely dismiss them and remain focused on the likelihood of two consecutive rate cuts in upcoming meetings.

Gold prices rose in the European market on Wednesday, extending gains for the fourth consecutive session and continuing to break records — surpassing the $4,000 mark for the first time in history.

The rally comes amid strong demand for the precious metal as a safe haven, driven by political developments in Japan and France, the ongoing US government shutdown, and growing expectations of additional interest rate cuts by the Federal Reserve.

Price Overview

• Gold Prices Today: Gold rose 1.1% to a record high of $4,027.30 an ounce, from an opening level of $3,984.97, after touching an intraday low of $3,983.35.

• On Tuesday, gold settled up 0.6%, marking its third consecutive daily gain amid heightened global political uncertainty.

Strong Demand

Demand for gold has surged this week, fueled by political turbulence in Japan and France, as investors flocked to the safe-haven asset amid rising uncertainty in the world’s major economies.

A senior White House official said the Trump administration would begin large-scale layoffs of federal employees if President Donald Trump determines that negotiations with congressional Democrats to end the partial government shutdown “yield no results.”

US Interest Rates

• Federal Reserve member Stephen Miran once again urged a sharp path of rate cuts, citing the influence of the Trump administration’s economic policies.

• Kansas City Fed President Jeff Schmid, however, said he was unwilling to cut rates further, emphasizing that the central bank should focus on the “extremely high inflation risk” rather than apparent labor market weakness.

• According to CME’s FedWatch Tool, market pricing currently indicates a 95% probability of a 25-basis-point rate cut at the October meeting, and a 5% probability of holding rates unchanged.

• To reassess these probabilities, investors are closely monitoring the resumption of key US economic data releases and upcoming comments from Federal Reserve officials.

Gold Outlook

• Vivek Dhar, head of commodities research at Commonwealth Bank of Australia, said in a note that the latest surge in gold prices “likely reflects safe-haven demand linked to the US government shutdown and the resignation of French Prime Minister Sébastien Lecornu.”

• Goldman Sachs raised its year-end 2026 gold price forecast to $4,900 per ounce from $4,300 on Monday, citing strong inflows into Western exchange-traded funds (ETFs) and sustained central bank purchases.

SPDR Gold Trust

Holdings at SPDR Gold Trust, the world’s largest gold-backed ETF, fell by 0.02 metric tons on Tuesday — the fourth consecutive daily decline — bringing total holdings down to 1,013.15 metric tons.

The New Zealand dollar fell broadly on Wednesday against a basket of major and minor currencies, extending its losses for a second consecutive session against the US dollar and hitting a six-month low amid heavy selling pressure following a dovish Reserve Bank of New Zealand (RBNZ) meeting.

Defying market expectations, the RBNZ cut interest rates by 50 basis points to their lowest level in three years and signaled further monetary easing to support the struggling economy.

As a result, traders increased their bets on another rate cut in November, anticipating additional stimulus to bolster demand and shield the economy from mounting global challenges.

Price Overview

• NZD/USD: The New Zealand dollar declined about 1.05% to 0.5739 — its weakest level since April — from an opening of 0.5800, after hitting a session high of 0.5802.

• On Tuesday, the kiwi closed down roughly 0.75% against the greenback, its first daily loss in eight sessions, as traders took profits after reaching a two-week high near 0.5845.

Reserve Bank of New Zealand

The RBNZ cut the official cash rate by 50 basis points to 2.50% — its lowest level since July 2022 — exceeding forecasts of a 25-point cut. This marks the eighth rate reduction since the central bank began its monetary-easing cycle in August 2024.

The central bank has now lowered rates by a total of 300 basis points since August 2024, as inflation continues to cool toward the 2–3% medium-term target range and economic activity and labor markets remain weak.

“The Monetary Policy Committee reached a consensus to reduce the official cash rate by 50 basis points to 2.5%,” the RBNZ said. “The Committee remains open to further reductions in the official cash rate as needed to ensure inflation stabilizes sustainably near the 2% midpoint of the target range over the medium term.”

Wednesday’s meeting was the second-to-last under Governor Christian Hawkesby, who will be succeeded by Swedish policymaker Anna Breman on December 1.

This dovish stance offers some political relief to Prime Minister Christopher Luxon, whose government has suffered sharp declines in popularity amid a faltering economic recovery that failed to materialize as promised during last year’s election campaign.

Interest Rate Outlook

• Following the RBNZ decision, market pricing for another 25-basis-point cut at the November 26 meeting surged above 95%.

• Futures now indicate the policy rate could fall to around 2.0% by the end of the year.

Market Commentary

Nick Tuffley, chief economist at ASB Bank, wrote: “The RBNZ’s decision suggests that the risk of weaker inflation pressures than previously expected has outweighed the need to wait and see how quickly the economy recovers — or whether there are any side effects from the recent rise in inflation.”

Joseph Capurso, head of international and FX research at Commonwealth Bank of Australia, who had predicted a 50-point cut, said: “Markets had only priced in about a 30% chance of a 50-basis-point move today. A fall in the New Zealand dollar was inevitable after such a surprise.”

The Japanese yen fell in Asian trading on Wednesday against a basket of major and minor currencies, extending its losses for the fifth consecutive session against the US dollar and hitting an eight-month low. The currency remains under pressure from continued selling amid mounting concerns over Prime Minister-elect Sanae Takaichi’s expected economic policies.

Following her victory as leader of Japan’s ruling Liberal Democratic Party (LDP), Takaichi — who is set to become the country’s next prime minister — pledged to stimulate Japan’s economy through aggressive fiscal spending while criticizing the Bank of Japan’s recent rate hikes.

Price Overview

• USD/JPY: The dollar rose 0.5% to ¥152.65 — its highest level since February — from an opening price of ¥151.90, after touching a low of ¥151.74.

• On Tuesday, the yen closed down roughly 1.05% against the dollar, marking its fourth consecutive daily loss amid heightened political developments in Japan.

Sanae Takaichi

Takaichi’s weekend victory in the LDP leadership race — making her Japan’s first female prime minister in modern history — has sparked widespread debate among investors regarding her upcoming economic agenda.

A close ally of the late Shinzo Abe, Takaichi is known for supporting the stimulus-heavy policies that defined “Abenomics.” This reinforces expectations that her administration may adopt an expansionary approach favorable for Japanese equities but potentially negative for the yen, as it would likely extend the era of ultra-loose monetary policy.

She reiterated her commitment to boosting the economy through large-scale fiscal spending and repeated her criticism of the Bank of Japan’s decision to raise interest rates.

Interest Rate Outlook

• Following Takaichi’s win, market pricing for a 25-basis-point rate hike at the Bank of Japan’s October meeting dropped from 60% to 25%.

• Yen swap markets now imply a 41% chance of a rate hike by December — down from 68% before the LDP leadership election.

Market Commentary

• Lou Brien, strategist at DRW Trading in Chicago, said: “There will be a period of adjustment as investors try to gauge how Takaichi’s policies will affect the currency.”

• Mohammed Al-Sarraff, foreign-exchange researcher at Danske Bank, noted: “The Bank of Japan may hold rates steady this month as a precaution, but by December it will likely have more data — and I expect another hike then.”

• He added: “Inflation remains too high, interest rates are still too low, and the rationale for another rate increase this year persists.”