• The USD lacks a firm intraday direction and oscillates in a narrow range during the Asian session.
• The USD ADP report lifted bets for two more rate cuts by the Fed and undermined the Greenback.
• A partial US government shutdown contributes to the bearish sentiment surrounding the buck.

The US Dollar Index (DXY), which tracks the Greenback against a basket of currencies, struggles to capitalize on the overnight bounce from a one-week low and oscillates in a narrow band during the Asian session on Thursday. The index currently trades around the 97.70-97.75 area, nearly unchanged for the day, and seems vulnerable amid dovish Federal Reserve (Fed) expectations.

Traders have been pricing in the possibility of two more interest rate cuts by the US central bank, in October and December, and the bets were reaffirmed by the disappointing US private-sector employment details on Wednesday. In fact, Automatic Data Processing reported that private companies shed 32K jobs in September, marking the biggest drop since March 2023. Moreover, the August payrolls number was also revised down to show a loss of 3K jobs compared to an increase of 54K reported initially.

Separately, the Institute for Supply Management's (ISM) Purchasing Managers' Index (PMI) came in slightly above consensus estimates and improved from 48.7 to 49.1 in September. This, however, still points to a contraction in the manufacturing business activity for the seventh consecutive month and fails to assist the USD in attracting any follow-through buying. Concerns that a prolonged US government shutdown could have an adverse effect on economic performance act as a headwind for the buck.

US government agencies began shutting down after President Donald Trump's Republican Party failed to agree with opposition Democrats on a way forward on a spending bill. The immediate effect will likely be a delay in the release of key US macro data, scheduled at the beginning of a new month, including the closely watched Nonfarm Payrolls (NFP) report on Friday. This, in turn, leaves the USD at the mercy of speeches from influential FOMC members later during the North American session.