HG MARKETS:

The Pound Sterling (GBP) advanced to a fresh weekly high near 1.3480 against the U.S. Dollar (USD) during Wednesday’s European trading session, as the Greenback faced renewed selling pressure following the onset of a U.S. government shutdown.

At the time of writing, the U.S. Dollar Index (DXY), which measures the currency’s performance against a basket of six major peers, traded 0.25% lower around 97.50, highlighting broad weakness across the U.S. currency complex.

The political deadlock in Washington deepened after government funding expired at midnight on Tuesday. Congressional Republicans failed to secure Democratic support for a short-term funding bill, which would have extended the deadline to November 21. As a result, non-essential federal agencies have suspended operations, creating fresh uncertainty for financial markets and weighing heavily on investor sentiment.

The shutdown is expected to have a meaningful impact on monetary policy expectations. U.S. statistical agencies have already signaled a suspension of key economic reports, including the highly anticipated September Nonfarm Payrolls (NFP) report, scheduled for release on Friday. The absence of critical labor market data could complicate the Federal Reserve’s decision-making process in the coming weeks, especially as policymakers weigh the balance between stubborn inflationary pressures and slowing economic momentum.

Adding to the political tension, U.S. President Donald Trump issued a stern warning, suggesting that Democrats could face long-lasting consequences for allowing the shutdown. “They’re taking a risk by having a shutdown. We can do things during the shutdown that are irreversible, that are bad for them,” Trump told Time Magazine.

On the UK front, the British Pound’s broader outlook remains mixed. Sterling has strengthened against the Dollar but continues to show uneven performance against other major peers. Market participants remain cautious, as Bank of England (BoE) policymakers are divided on the inflation outlook. While some officials argue for tighter policy to contain persistent price pressures, others warn that restrictive monetary conditions may weigh heavily on already fragile domestic demand.

Looking ahead, the near-term trajectory of GBP/USD will be shaped by upcoming U.S. labor market data. Traders will closely monitor the ADP Employment Change report, due at 12:15 GMT on Wednesday. Consensus expectations suggest U.S. private payrolls grew by 50,000 jobs in September, slightly below the 54,000 positions recorded in August. A weaker-than-expected outcome could further pressure the Dollar, particularly against Sterling, as it would reinforce concerns over the Fed’s policy outlook amid limited availability of official data.

In summary, the Pound-Dollar pair is currently supported by broad U.S. Dollar weakness stemming from political uncertainty and data risks, but Sterling’s upside potential remains capped by ongoing domestic policy debates. Market volatility is likely to remain elevated throughout the week, with traders awaiting clarity on both U.S. labor market indicators and the BoE’s evolving stance on inflation.