USD Weakens as US Shutdown Ends and Rate Cut Expectations Rise

The US dollar has retreated 0.4% across major pairs as the resolution of government shutdown concerns combines with growing expectations for Federal Reserve rate cuts in 2024. The dollar index dropped to 105.80 from recent highs near 106.50, with GBP/USD advancing to 1.2680 and USD/JPY declining to 149.50. Market pricing now reflects a 65% probability of a March rate cut, up from 45% last week, following softer inflation components in recent economic data. The Swiss franc strengthened to 0.8640 against the dollar as safe-haven flows reversed with shutdown risks eliminated. Treasury yields fell 8 basis points to 4.52% on the 10-year, further pressuring the greenback. Technical analysis shows the dollar index approaching key support at 105.50, which if broken could accelerate the decline toward 105.00. Traders are positioning for continued dollar weakness unless upcoming economic data significantly exceeds expectations.