The U.S. dollar edged slightly higher on Tuesday following progress toward ending the longest government shutdown in U.S. history, while the British pound slipped after soft wage growth data reinforced expectations for a Bank of England rate cut next month.

At 04:10 ET (09:10 GMT), the Dollar Index, which measures the greenback against six major currencies, rose 0.1% to 99.580.

Dollar finds modest support amid government funding progress
The dollar posted small gains after the U.S. Senate passed a bill late Tuesday to restore government funding and bring the prolonged shutdown to a close. The legislation now moves to the House of Representatives, where Speaker Mike Johnson said he hopes to pass it as early as Wednesday before sending it to President Donald Trump for approval.

“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 resolution to the shutdown would also allow the U.S. government to resume publishing key economic reports, providing fresh insights into the state of the world’s largest economy. Last week, the University of Michigan’s consumer sentiment index fell to its lowest level in nearly three and a half years, reinforcing expectations for another Federal Reserve rate cut in December.

Sterling falls as U.K. wage growth eases

In Europe, GBP/USD dropped 0.4% to 1.3124 after data showed the U.K. labor market cooled more than expected in the third quarter. Unemployment rose to 5.0% from 4.8%, the highest since February 2021, while wage growth excluding bonuses slowed to 4.6% in the three months to September from 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 little changed, with EUR/USD steady at 1.1556, ahead of the ZEW economic sentiment release later in the day.

“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 at nine-month low amid risk-on sentiment

In Asia, USD/JPY traded 0.1% higher at 154.30, with the yen hovering near a nine-month low as risk appetite improved on optimism over the U.S. funding deal. The currency also softened after Japan’s new Prime Minister Sanae Takaichi urged policymakers to proceed cautiously with future interest rate increases.

Elsewhere, USD/CNY edged up to 7.1207, with the yuan remaining under pressure amid persistent worries about China’s slowing economy. Slightly better-than-expected October inflation data did little to bolster sentiment.

The Australian dollar also weakened, with AUD/USD slipping 0.2% to 0.6524, giving back some of its recent gains following the U.S. Senate’s breakthrough vote on Sunday.

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