The US Senate passed a bill to end the government shutdown yesterday. The House will vote in the next couple of days, and while a majority isn’t fully guaranteed, expectations are that the bill will pass, ING's FX analyst Francesco Pesole notes.

Markets are underestimating the downside risks for USD into year-end

"The government reopening trade has taken the shape of textbook risk-on moves in FX. The most equity-sensitive currencies are following gains across stock markets (AUD and NZD, leading) and the yen is under pressure. On a broad level, the impact on the dollar has so far been neutral, which is in line with the reaction to the beginning of the shutdown in October."

"Reopening prospects allow markets to price out the negative growth impact, but a resumption of data releases in the US does carry non-negligible downside risks to the dollar. In our view, the latter factors should prevail, as we think markets are underestimating the downside risks for the labour market, US front-end rates and – by extension – the dollar into year-end."

"But it will take time to see those data releases, even if the government reopens in the coming days. High-beta currencies might have a bit more juice to squeeze, but overall we don’t see this as a volatility-inducing event in G10 and expect the dollar to stay rangebound with some downside risks today."