Treasury Secretary Bessent said the US has a strong USD policy and hasn't intervened to support the JPY. This partially alleviated concerns that President Trump's remark that he isn't concerned about the dollar's fall is a policy shift. The USD briefly rose, but the market is unlikely to shake off Trump's view and it should remain on the back foot for now .
Trump again warned Iran that unless it makes a nuclear deal, the US is ready to attack it. The comment raised the odds of a war, in our view to 60%. This lifted Brent to a four-month high and gold to a record, which should support the currencies of commodity exporters .
Democrat senators have dug in their heels opposing government funding unless curbs, likely unacceptable to Trump, are imposed on the DHS as he implements his immigration policy. We see government shutdown odds on Saturday at 85-95% . This poses growth risks and would likely delay NFP data due next Friday. Market impact shouldn't be large, but at some point, Washington's modus operandi should weigh on US assets , esp. the USD.
The FOMC stayed put on rates (vote: 10-2). Its statement and Chair Powell's comments raised the growth and employment outlook by more than markets expected. However, this doesn't change the prospect of an on-hold Fed until Powell is replaced, barring economic shocks.