US Shutdown Deepens Currency Trading Challenges
Critical economic data have not been released for weeks, causing traders to hesitate before making significant bets on the US dollar's future. This has contributed to the worst year for currency trading since 2005.
Impact of the Government Shutdown
The longest US government shutdown on record is worsening conditions for currency traders, clouding the outlook for the dollar due to a lack of economic information.
Market Performance and Reactions
Foreign-exchange investors are on track for their poorest performance in nearly two decades, according to the BarclayHedge index. Prior to the data freeze, major financial firms such as Goldman Sachs, Morgan Stanley, and Bank of New York Mellon already reported declines in currency trading revenues last quarter.
Data Vacuum Effects
- Economic and market positioning statistics have been withheld because of the shutdown.
- Traders are reluctant to make large wagers on the dollar's direction.
- Algorithm-driven quantitative funds struggle due to the lack of high-quality data.
- Strategists are postponing updates to their forecasts.
Market Volatility
Consequently, foreign exchange volatility has dropped well below historic averages, a stark contrast to the high volatility triggered by President Donald Trump's global tariff announcement in April.
"Foreign-exchange investors are on course for the poorest annual performance since 2005, according to a BarclayHedge index."
"Amid the federal shutdown, crucial economic and market positioning statistics have not been published in weeks."
Summary: The ongoing US government shutdown has created a data blackout that hampers currency traders, leading to the worst year for forex trading since 2005 and significantly reduced market volatility.