In the early hours of March 14, 2025, Senate Democratic Leader Chuck Schumer revealed on Thursday night that as the Senate readies to deliberate on a GOP stopgap funding bill on Friday, he intends to vote in favor of it to keep the government operational. This announcement significantly reduces the likelihood of a government shutdown.
Schumer’s Rationale: Balancing Interests for the Nation
Schumer stated that he believes his responsibility is to make the optimal decision for the country and minimize harm to the American people. Despite criticizing the GOP funding bill as deeply flawed, saying it’s not a “clean” continuing resolution, is highly partisan, and fails to address many of the nation’s needs, he emphasized that the potential consequences of a government shutdown are far graver. He specifically pointed out that a shutdown could give Donald Trump more power, which he considered a much worse scenario. Schumer accused Trump of causing damage to the country and using chaos as a political weapon, suggesting that a shutdown would be a distraction for Trump to further his unfavorable agenda.
Market Response: Slight Dip in the USD Index
At the time of reporting, the US Dollar Index had declined by 0.03% for the day, standing at 103.81. The market reacted to Schumer’s statement, and while the current drop is minor, the future movement of the US dollar remains subject to various factors, with the subsequent progress of the government funding bill being a crucial one.
Insights into the USD
The USD’s Standing and History: The US Dollar (USD) serves as the official currency of the United States and is de facto in circulation in many other countries alongside local currencies. It holds the title of the world’s most actively traded currency. Data from 2022 shows that it accounts for over 88% of global foreign exchange turnover, with an average daily transaction volume of $6.6 trillion. After World War II, the USD replaced the British Pound as the world’s reserve currency. Historically, the US Dollar was backed by gold for a long time until the Gold Standard was abandoned in 1971 under the Bretton Woods Agreement.
The Federal Reserve’s Influence on the USD: Monetary policy, shaped by the Federal Reserve (Fed), is the most significant factor affecting the value of the US Dollar. The Fed has two main objectives: maintaining price stability (controlling inflation) and promoting full employment. Its primary means of achieving these goals is adjusting interest rates. When prices rise too rapidly and inflation exceeds the Fed’s 2% target, the Fed will hike rates, which typically strengthens the USD. Conversely, if inflation falls below 2% or the unemployment rate is too high, the Fed may lower interest rates, putting downward pressure on the dollar.
Quantitative Easing and Its Impact on the USD: In extreme economic situations, the Federal Reserve can implement quantitative easing (QE), which involves printing more dollars. QE is a non – standard policy measure used when the credit market freezes because banks are reluctant to lend to each other due to concerns about counterparty default. It was the Fed’s key strategy during the 2008 Global Financial Crisis. Under QE, the Fed prints dollars to purchase US government bonds, mainly from financial institutions. Generally, QE leads to a weaker US Dollar.
Quantitative Tightening and Its Effect on the USD: Quantitative tightening (QT) is the opposite of QE. The Federal Reserve stops buying bonds from financial institutions and does not reinvest the principal from maturing bonds into new purchases. This process usually has a positive impact on the value of the US Dollar.
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