The US Dollar (USD) is a little softer as short-dated US rates sit at their lows for the year. Last night's release of the Fed's Beige Book suggests the Fed will have enough evidence to cut rates at the end of the month – even if official data releases remain suspended because of the government shutdown. Here, betting markets expect the government to remain closed into November, ING's FX analyst Chris Turner notes.

French news help the Euro softening DXY

"The hottest topic for financial markets right now is US-China relations ahead of some key dates. Presidents Trump and Xi are meant to be meeting on the sidelines of the APEC summit in Korea in the 29-31 October window. This is before the 10 November deadline for the 90-day truce on tariffs, where no extension would see US tariffs on China revert to 145%. The question for financial markets is whether China's proposed export controls on rare earths are merely part of a bargaining ploy to achieve greater concessions from the US."

"Or really whether it is a threat which would stick and greatly disrupt global supply chains, given rare earths' role in products like semiconductors, EVs, defence and advanced manufacturing. China's move has clearly exercised G7 nations, who are in the process of issuing a joint and rare statement protesting this. US Treasury Secretary Scott Bessent is keen to portray the controls as a move by an overzealous Chinese Commerce Department and has dangled a longer than 90-day extension on tariffs for the next rollover. But any failure to get these controls negotiated away could lead to a bumpy few weeks for global asset markets."

"Elsewhere, some positive news out of France has helped the euro and softened DXY. Yet DXY could get some more support tomorrow should LDP President Sanae Takaichi be able to cut a deal with the Ishin political party. This would rebuild a minority coalition grouping and make it more likely that Takaichi is approved as Japan's next PM on 21 October. Her policies are seen as yen-negative. US data is delayed today, but we do get speeches from two Fed doves, Christopher Waller and Stephen Miran around 1500CET today. Their speeches could mildly weigh on the dollar. DXY may not stray too far from 98.50 today."