U.S. shutdown freezes data, FX funds head for worst since 2005

With payrolls, CPI and trade reports on hold, FX desks have been left without the catalysts that normally generate intraday moves, while clients have stepped back from hedging and options trades.

Spot, forwards and options volumes – already under pressure through 2025 because of narrow interest-rate differentials and lower realized volatility – fell further in October and early November when the shutdown began to delay headline US releases. The data blackout arrived at the worst possible moment: dealers had spent most of the year watching clients do fewer G10 trades, roll existing hedges instead of opening new ones, and shift to smaller ticket sizes in emerging markets. Taking away the US calendar erased one of the last reliable sources of volatility.

The impact has been visible across the main buckets. Spot desks say intraday ranges in EUR/USD, USD/JPY and GBP/USD compressed even more once markets realized the Labor Department and Commerce Department would not report, leaving them to trade almost solely on central-bank commentary. Options desks report thinner demand for short-dated volatility around what would have been payrolls day or CPI day. Forward and swap desks, which normally use US data to help corporates time hedges, said some customers simply postponed trades until government websites publish again.

Emerging-market currencies have been pulled into the slowdown as well. In early October EM FX briefly firmed because the absence of US data tamped down dollar swings, but by November traders said the same lack of direction was cutting volumes in liquid EM pairs too, since investors did not want to add exposure without knowing the US growth and inflation backdrop. That left banks with lower turnover both in core G10 and in EM, an unusual alignment that resembles 2005, when low volatility and clear monetary-policy paths also depressed currency trading.

Market strategists have warned for weeks that the shutdown “blinds” the Federal Reserve and, by extension, the FX market. Without nonfarm payrolls or CPI, the Fed must rely on high-frequency private indicators and its own forecasts to justify rate cuts, and currency traders must infer policy from speeches instead of from data. That makes every Fed remark more sensitive but does not deliver the broad, liquid two-way trading that a payrolls surprise would.

The 2025 shutdown became the longest in US history.