How a U.S. government shutdown could impact global markets
News Summary
The U.S. government entered a shutdown on Wednesday, sparking widespread discussion in global markets about its potential economic impact. While historical data suggests government shutdowns typically have a negligible effect on capital markets, the timing of this one is significant, occurring just ahead of a Federal Reserve meeting with crucial U.S. jobs data publication delayed, clouding the Fed's outlook. President Trump has threatened to use the shutdown to enact substantial public sector job cuts. Analysts offer mixed views: Aberdeen's Deputy Chief Economist, Luke Bartholomew, believes the shutdown adds to concerns over U.S. institutional credibility and fiscal dysfunction, while Premier Miton's CIO, Neil Birrell, notes that a prolonged shutdown could dampen risk-on sentiment across global markets, pushing investors towards safe-haven assets like gold, silver, and cryptocurrencies. RSM U.S. Chief Economist Joe Brusuelas indicates the shutdown could pressure the dollar and impact the Fed's October rate decision, with mass federal worker firings potentially leading to further dollar declines, capital flows into the euro and yen, and reduced demand for European (especially German) exports. Conversely, UBS analysts view the shutdown as a minor risk event, citing historically muted and short-lived market impacts, and believe it's unlikely to derail the Fed's easing cycle, advising investors to focus on other market drivers such as Fed rate cuts, strong corporate earnings, and AI capital expenditure.
Background
On October 1, 2025, the U.S. government entered a shutdown. Under President Donald J. Trump (re-elected in November 2024), government shutdowns are not unprecedented, as his first term included the longest partial government shutdown in U.S. history. The current shutdown is set against a backdrop where President Trump has threatened to use the opportunity to enact
In-Depth AI Insights
Q: Given the Trump administration's history of prolonged shutdowns, what is the true strategic intent behind this current shutdown? Is it merely a budget impasse, or a deeper political maneuver to reshape the federal government or pressure the Federal Reserve? A: This shutdown likely transcends a simple budget disagreement and forms part of a broader Trump administration strategy to solidify control over federal agencies and exert pressure on the Federal Reserve. - President Trump's threat of public sector job cuts may reflect a long-term objective to reduce the size and influence of the federal government, aligning with his