The U.S. dollar moved slightly higher on Tuesday as optimism grew that the record-long U.S. government shutdown could soon come to an end, while the British pound weakened after a slowdown in wage growth increased expectations for a Bank of England rate cut in December.

At 04:10 ET (09:10 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, was up 0.1% at 99.580.

Dollar steady amid progress on U.S. funding deal

The greenback gained modestly after the U.S. Senate passed a bill late Tuesday to restore federal funding and end the protracted government shutdown. The bill now moves to the House of Representatives, where Speaker Mike Johnson said he hopes to secure passage as early as Wednesday before sending it to President Donald Trump for signature.

“The government reopening trade has taken the shape of textbook risk-on moves in FX. The most equity-sensitive currencies are following gains across stock markets (AUD and NZD, leading) and the yen is under pressure,” said analysis at ING, in a note.

“On a broad level, the impact on the dollar has so far been neutral, which is in line with the reaction to the beginning of the shutdown in October.”

A conclusion to the shutdown would allow the U.S. to resume releasing key economic data, providing investors with a clearer picture of the economy’s trajectory. On Friday, the University of Michigan’s consumer sentiment index dropped to its weakest level in nearly three and a half years, further fueling expectations that the Federal Reserve could deliver another rate cut in December.

Sterling dips as U.K. labor market softens

In Europe, GBP/USD fell 0.4% to 1.3124 after U.K. employment data pointed to a notable cooling in the labor market. The unemployment rate rose to 5.0% from 4.8%, the highest since February 2021, while wage growth excluding bonuses slowed slightly to 4.6% in the three months to September, compared with 4.7% previously.

“These aren’t screamingly dovish figures, but they do endorse to some extent the ongoing dovish repricing of Bank of England rate expectations,” said ING. “Both inflation and jobs data are starting to point down, and we think the Autumn Budget’s tax hikes will provide the final argument for a cut in December.”

The euro was broadly stable, with EUR/USD holding around 1.1556, as traders awaited the latest ZEW economic sentiment survey for further guidance.

“We continue to look at 1.150 as a floor and see room for stabilisation close to 1.160 based on our short-term valuation indicators, but the probability of a major revamp in depressed EUR/USD volatility remains low this week,” said ING.

Yen under pressure as risk sentiment improves

In Asia, the USD/JPY pair edged up 0.1% to 154.30, with the yen hovering near a nine-month low as investor risk appetite strengthened on hopes of a U.S. government funding breakthrough. The currency also weakened after Japan’s new Prime Minister Sanae Takaichi urged policymakers to proceed cautiously on future rate hikes.

Meanwhile, the Chinese yuan traded slightly weaker, with USD/CNY rising to 7.1207, as concerns persisted about China’s slowing economy. Modestly positive October inflation data provided limited support.

The Australian dollar retreated as well, with AUD/USD down 0.2% to 0.6524, paring recent gains made after the U.S. Senate’s vote over the weekend signaled progress toward ending the shutdown.

Forex prices

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