USD strengthens as Gold nears $4,000 - BBH

US Dollar (USD) is up against all major currencies, S&P500 futures are flat after the underlying index hit a fresh high yesterday, and gold prices continue to go parabolic inching towards $4,000 per ounce, BBH FX analysts report.

U.S. shutdown drags into seventh day

"There's no clear sign yet of a deal to the end the US government shutdown which enters its seventh day. A fresh round of votes in the Senate yesterday to reopen the government failed to get the necessary support of 60 votes. The longer the US government shutdown lasts, the greater the downside risks to the labor market as the White House raised the specter of a permanent downsizing of federal workers."

"Kansas City Fed President Jeff Schmid (2025 FOMC voter) delivered hawkish remarks. Schmid views "the current stance of policy as only slightly restrictive, which I think is the right place to be" given that "inflation is too high" and the cooling in the labor market is "consistent with relieving price pressure and returning inflation to 2 percent." Fed speakers today include: Bostic (non-voter), Bowman, Miran, and Kashkari (2026 voter)."

"Fed funds futures continue to imply roughly 50bps of cuts by year-end to a target range of 3.50-3.75%, which is in line with the FOMC's median projection. We anticipate the Fed to turn more dovish by the time of the December FOMC meeting because restrictive monetary policy can worsen the already fragile employment backdrop and upside risks to inflation are not materializing. Bottom line: USD downtrend is intact."