US President Donald Trump on Christmas day confirmed that part of the Government will remain shut down until the Senate approve his $5bn demand for the wall which will separate the US and Mexico.
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The Democrats within the Senate are offering $1.3bn for defence which is the same amount as last year and at present both parties don’t seem to want to give any ground on the matter. A Government shut down is devastating for the US economy and the longer it goes on for the worse it's likely to get.
Going into next year, Congress returns on the 3rd January and this could be a concern for the President now that the House is controlled by the Democrats. Personally, I expect it will be Trump that backs down as the Democrats will hold strong and won’t approve the $5bn demand. Furthermore, the President will have to tread carefully going into 2019 as Congress could dig deeper into the Russian election meddling debate and also Trumps tax affairs which against could put pressure on the President and consequently the US dollar.
It’s not looking great for the US dollar at present due to the Government shutdown, and the Fed's stance in regards to interest rates should also be a concern for clients selling US dollars in the months to come. The Fed gave a dovish statement at the last interest rate decision in December and many forecasters are suggesting the Fed's hiking of interest rates is coming to an end. If this is the case and other central banks around the world start to announce that interest rate hikes are on the horizon investment should leave the US and consequently the US dollar will fall in value.
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