Why government shutdown odds are spiking: Both parties see some upside

Economic

Summary:

Government shutdown odds are rising as both Republicans and Democrats see political benefit in a stoppage. With talks stalled, Trump pushing mass firings, and neither side willing to yield, markets brace for Oct. 1.

The growing sense in Washington is that the latest government funding fight between Republicans and Democrats is shaping up differently.

And why things may be more likely to end in a shutdown is simple: Not only are both parties OK with a funding stoppage, but some partisans even view the idea of going through with it as an opportunity or political necessity.

Markets, meanwhile, have grown accustomed to tuning out Washington's regular displays of brinksmanship. But Wall Street may turn to the issue in earnest starting Monday, when lawmakers return with less than 48 hours before a partial government shutdown could take effect on Oct. 1 at 12:01 a.m. ET.

The latest example of how the current funding fight is playing out differently — with political pressure seeming to push in the direction of shutdown — came late on Wednesday when President Trump's White House asked federal agencies to consider mass firings as part of their shutdown planning efforts.

It's a way for Trump's team to accomplish previously unrelated goals — those often expressed by the Department of Government Efficiency (DOGE) — in a different manner, with the memo saying firings could be focused on areas "not consistent with the president's priorities."

It was also a move intended to increase the pressure on Democrats.

Whether it causes Senate Majority Leader Chuck Schumer and others to blink remains to be seen, but the new threat is just one factor Democrats are weighing, as they often note a shutdown as one of their vanishingly few points of leverage.

Party leaders are also answerable to a Democratic base that appears to be fine with a shutdown — especially if the only alternative is seen as "bending the knee" to Trump.

Washington being Washington, an abrupt end to the standoff is always possible. But the increased odds are a sign that more and more people, both in Washington and on Wall Street, are beginning to believe Schumer when he says, as he told reporters recently in reference to the last standoff, "The world is totally changed from March."

As Signum Global Advisors recently noted to clients, "Our base case has, and continues to be, that the government will shut down on October 1." Others are offering a similar scenario, with above-even odds for the time being that Wednesday dawns with government offices closed.

A hard-line stance from both sides

Trump has slammed Democrats, saying they will be to blame, but the president has evinced little public concern about whether he would be hurt by a stoppage — saying at one point, "We could very well end up with a closed country for a period of time."

The president also abruptly canceled a meeting with Democrats this past week that had been seen as one of the few avenues to a deal. Trump said that "no meeting ... could possibly be productive."

That hard-line stance from Trump — which is being echoed across his party — comes as Democrats appear caught between having no audience for their demands and a base of voters who view capitulating to Republicans as the worst possible outcome.

A recent survey from the progressive firm Data for Progress found that seven out of 10 Democrats support the idea of their party leaders voting for a shutdown unless Republicans make concessions.

Also front of mind for Democrats is how the most recent standoff in March ended in anticlimactic fashion when Schumer dropped many of his demands at the last minute and rallied moderate Democrats to vote to keep the government open.

It has forced Schumer to make amends with his left flank, to mixed results so far.

For the moment, there appears to be little means to a conclusion short of a capitulation by one side or the other.

Last week saw the failure of party-line plans in the Senate on both sides.

The Republicans offered a plan to keep the government open until Nov. 21 with minimal other changes. A Democratic plan aimed to do the same but added some party priorities, such as reversing recent healthcare cuts enacted by Republicans.

Both bills failed to reach the required 60 votes to advance.

That left limited options to avert a stoppage — even more limited now after the meeting between Trump and Democrats was canceled — leaving both sides most focused at the moment on convincing voters that any shutdown will be the other side's fault.

As Trump said when he canceled the planned meeting with Democrats, the only way he'll meet with them is if they "become realistic." Democrats shot back that it's the president who is "barreling the country toward a painful government shutdown."

Source: finance.yahoo

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Adam

Commodity

Silver Prices Eye Volatility as PCE Report Looms

Silver traders are on edge heading into the Friday release of the U.S. Personal Consumption Expenditures (PCE) inflation report, with price action tightly coiled around key technical levels. After touching a multi-year high at $45.23, spot silver has pulled back slightly as the market awaits inflation data that could recalibrate the Fed’s policy stance—and trigger significant price swings.

At 10:56 GMT, XAG/USD is trading $45.02, down $0.16 or -0.36%.

Fed Rate Cut Odds Under Pressure From Hotter U.S. Data

Expectations for a dovish Fed have cooled sharply this week. Revised second-quarter GDP showed stronger-than-expected growth, jobless claims fell, and new home sales jumped 20% in August—collectively challenging the case for immediate policy easing. Adding to the pressure, Kansas City Fed President Jeffrey Schmid reinforced the hawkish tone, noting that current monetary policy is only “slightly restrictive” and that inflation is still too elevated.

These developments have pushed rate cut expectations lower. CME FedWatch shows the odds of an October cut dropping from 92% to 85.5% in recent sessions, strengthening the dollar and adding pressure to rate-sensitive assets like silver.

Tariffs Add a Layer of Inflation Risk

Complicating the Fed’s calculus is the inflationary impact of recent tariffs. Goldman Sachs estimates they added 0.10 percentage points to August’s PCE, and expects year-over-year inflation to hit 3.2% by year-end. While core PCE is forecast to cool to 0.21% month-over-month from July’s 0.27%, the lagging effect of tariffs on broader prices adds uncertainty to any downside inflation surprise.

Morningstar and Vanguard analysts both flagged that tariff effects are likely still working their way through the system, raising the stakes for Friday’s inflation print.

Silver Levels to Watch: $43.18 to $49.81

Technically, the PCE report is a potential catalyst for a decisive move in silver. A weaker-than-expected print could trigger a rally above the recent $45.23 high, opening the door to test $49.81.

On the downside, stronger inflation data may pressure silver below the $43.18 pivot, exposing supports at $41.14, $40.73, and $40.40. The 50-day moving average at $39.84 remains the key downside target if selling accelerates.

Traders Brace for High-Impact Inflation Surprise

With inflation still well above the Fed’s 2% target and the dollar strengthening, silver remains vulnerable to the direction of Friday’s PCE data.

A softer print may reignite rate cut speculation and lift precious metals, while any upside surprise could prompt a deeper pullback.

Traders should prepare for heightened volatility around the release, with technical levels offering clear guidance for positioning.

Source: fxempire

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Adam

Commodity

Oil headed for its biggest weekly gain in more than three months as US President Donald Trump increased pressure on buyers of Russian energy in a bid to end the war in Ukraine.

Brent was steady above $69 a barrel on Friday, and is up about 4% this week. Trump pressed Turkish President Recep Tayyip Erdogan to stop buying oil from Russia and discussed energy security with Hungarian Prime Minister Viktor Orban, after earlier this week rebuking NATO members for buying fuel from the OPEC+ producer.

Turkey “has a lot of options,” while Hungary and Slovakia are landlocked, and are “sort of married to one pipeline,” Trump told reporters in the White House.

Oil Set for Strong Weekly Gain as Pressure on Russia Intensifies_1

That comes as Russia’s physical supplies are pressured by Ukrainian drone strikes on energy infrastructure. Meanwhile, European diplomats warned the Kremlin this week that the North Atlantic Treaty Organization is ready to respond to further violations of its airspace with full force, including by shooting down Russian planes, according to officials familiar with the exchange.

“The main factors driving up prices are concerns about tougher sanctions against Russia and fears of major production and supply disruptions as a result of increasingly targeted Ukrainian attacks on Russian energy infrastructure,” Commerzbank analyst Barbara Lambrecht said.

Still, this week’s gain has failed to lift oil out of a tight trading band it’s been in since early August, as investors weigh a loose market balance against rising geopolitical tensions. Forecasters including the International Energy Agency anticipate a surplus later this year, driven by increased output from OPEC and its partners, as well as from producers outside the group, especially in the Americas.

Global supplies are set to increase further as exports from the Kurdistan region in Iraq through a pipeline to Turkey’s Ceyhan port are set to resume Saturday. Following a halt of more than two years, the resumption of shipments will initially bring 230,000 barrels a day to international markets, rising to as much as half a million barrels a day in future.

Source: Bloomberg

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Glendon

Political

Middle East Situation

Benjamin Netanyahu struck a defiant tone in his speech to the United Nations General Assembly, vowing to continue Israel’s war in Gaza until Hamas is destroyed and slamming Western countries that recognized Palestinian statehood in recent days.

“We will not commit national suicide because you don’t have the guts to face down a hostile media and anti-Semitic mobs demanding Israel’s blood,” the prime minister said in New York on Friday, referring to the recognition of Palestine by France, the UK, Canada and others. The message to Hamas, Netanyahu said, was that “murdering Jews pays off.”

Many delegates walked out as Netanyahu prepared to speak, leaving he hall largely empty.

Israel’s longest serving leader cited the country’s military successes over Iran-backed militias and Tehran itself over the past year. He said that while Israel wanted to end the war in Gaza “as fast as possible,” it wouldn’t stop until Hamas was defeated or surrendered.

He spoke of the violence perpetrated by Hamas — designated a terrorist organization by the US, European Union and others — on Oct. 7, 2023. That day, it attacked Israel, killing 1,200 people and taking another 250 as hostages.

He largely ignored the suffering of Palestinians in Gaza, beyond saying that Israel was doing all it could to prevent civilian casualties. He strenuously denied his government was carrying out genocide.

Source: Bloomberg Europe

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Samantha Luan

Economic

Forex

In a speech given at the launch of the a new village cooperatives scheme on 21 July 2025, Indonesian President Prabowo Subianto promise to combat what he labels ‘greednomics’. His main concern was reports of rice traders in Indonesia buying low quality paddy, rough rice grain, at below-market prices to then sell milled rice dishonestly as premium quality rice, disenfranchising farmers and consumers. More broadly, Prabowo took issue with economic practices in which greedy traders prioritise profit at the expense of social interests.

Ad-libbing on how to resolve such fraudulent practices in rice distribution, Prabowo pointed to Article 33 of Indonesia’s Constitution, which mandates state control over important sectors of production and natural resources. But, except for a threat to ‘confiscate the rice mills and hand them over to cooperatives’, his speech was devoid of concrete proposals.

Speculation was rife in Indonesia as to whether this was an off-the-cuff comment without practical consequences or the start of a broader campaign to liberate Indonesia from the scourge of ‘greednomics’. So far, Prabowo has broadened his rhetoric against ‘greedy businessmen’, but has not yet specified concrete measures.

Focusing on fraudulent practices in rice distribution, Prabowo’s concerns about disenfranchised farmers and consumers are the latest iteration of an almost 90-year sequence of government attempts to control Indonesia’s rice market. Past governments’ justifications included arguments that middlemen exploit rice farmers and consumers. Jakarta’s solution was to establish rice logistics parastatal organisations to regulate or control the acquisition and milling of paddy and the distribution of milled rice, operating through village authorities or farmer cooperatives. Their stated aim was to guarantee fair prices to farmers and consumers and eradicate excessive greed of middlemen.

Indonesia has very mixed historical experiences with such parastatals. They contributed to the causes of disastrous famines in 1944–45 and 1964–65. In both instances, accelerating inflation eroded official purchase prices, after which administrative and military forces colluded to force farmers to surrender quotas of rice. Rice was siphoned off to black markets, fuelling illicit riches. Eroded purchase prices led farmers to decrease surplus rice production.

Things seemed to change with the establishment of the state food logistics agency Bulog in 1967. Increasing oil revenues allowed government subsidies that guaranteed farmers higher paddy prices, contributing to the success of Indonesia’s Green Revolution. But Bulog soon became a cesspool of greed. In 1968, Prabowo’s father, then minister of trade and industry Sumitro Djojohadikusumo, vowed to abolish it. But he failed — Bulog received a monopoly on rice distribution and became an ingrained feature of Suharto’s presidency.

Corruption scandals surrounded Bulog until it was stripped of its monopoly powers in 2003 following Suharto’s resignation. But a degree of control remained in the form of the government licensing of rice imports. Indonesian rice prices steadily exceeded prices in Thailand and Vietnam, major rice exporting countries. Anyone who could persuade the Indonesian Ministry of Trade of impending rice shortages to secure a licence to import rice gained a licence to print money. Several rice import scandals followed.

Indonesia already has extensive experience with efforts to control the perceived greed of middlemen. The previous, ineffective solutions are what Prabowo has again implicitly proposed — state control over rice distribution. In the past, each solution nurtured new rent-seeking opportunities. Will a Bulog 3.0 be any different?

Prabowo noted that the manipulation of rice distribution had caused ‘losses’ of 100 trillion rupiah (US$6 billion) annually in the form of unrealised revenues from taxing rice millers and traders. The implication was that resolving ‘greednomics’ in rice distribution would boost tax revenues by this amount. Eradicating ‘greednomics’ in rice distribution may lead to fair prices for farmers and consumers and more regular profits for rice millers and traders, but taxing those regular profits will not generate the same amount as the untaxed ‘greednomics’ profits of millers and traders.

Taking control of rice distribution would also come at a time when Indonesia’s rice is considerably more expensive than rice that can be imported from mainland Southeast Asia. At the same time, per capita production and consumption of rice is decreasing, not just because rice farmers are disincentivised by greedy middlemen, but because demand continues to shift to other food products.

The easy solution to ‘greednomics’ in rice distribution would be to lift restrictions on rice imports. Lower domestic rice prices will benefit consumers. Lower rice profitability will drive the greediest middlemen out of rice distribution and encourage rice farmers to diversify to farm products with higher value added and growing demand.

But such deregulation may not sit well with the policy rhetoric that Indonesia should have ‘food security’, even though Indonesia is importing record amounts of non-rice staples such as wheat and soybeans. Nor would it sit well with Prabowo’s strict reading of Article 33 in the Constitution that state control should take charge of securing social welfare for Indonesia’s people.

Pierre van der Eng is Associate Professor at the Research School of Management, The Australian National University.

Source: East Asia Forum

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Michelle

Economic

Forex

Canadian GDP rose by 0.2% m/m in July, partly reversing three consecutive monthly contractions. The print was a tick hotter than consensus expectations.

Compositionally, 11 of 20 industries registered an increase on the month. Goods industries rebounded by a hefty 0.6% m/m, while the services sector nudged higher by 0.1% m/m.

On the goods side, a 1.4% m/m gain in the mining, oil & gas sector made the biggest contribution to headline growth. A 0.7% m/m increase in the manufacturing sector also provided an assist after falling last month. Elsewhere, the agriculture and construction sectors were up by a softer 0.1% m/m.

On the services side, gains in wholesale trade (0.6% m/m), transportation and warehousing (0.6% m/m) and real estate (0.3% m/m) did most of the heavy lifting. A weaker month for retail trade (-1.0% m/m) and information and cultural services (-0.6% m/m) counterbalanced some of the services side gains.

The advanced guidance for flat growth in August GDP is the result of gains in wholesale and retail trade that are offset by a reversal in the oil & gas, manufacturing, and transportation sectors.

Key Implications

Growth in Canada’s tariff-impacted industries contributed most to July’s brighter-than expected print. Stabilization across these sectors underpins our view that GDP growth in the third quarter is set to recover modestly after last quarter’s trade-driven contraction. Early-tracking suggests sub-1% annualized growth in Q3, which is in line with our expectations, and a touch below the Bank of Canada’s (BoC) most recent projections.

The BoC will take this reading in stride, as they continue to weigh the risks around inflation and growth. Looking forward, we maintain our view that the BoC has room to cut rates again in the fourth quarter. The growth backdrop is expected to gradually recover over the next couple quarters, but economic slack will persist. What’s more, the outlook continues to face considerable uncertainty, not least as Canada and the U.S. soon enter USMCA renegotiations.

Source: ACTIONFOREX

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Adam

Commodity

Natural Gas Futures Hold Gains but Struggle at Technical Ceiling

U.S. natural gas futures edged higher Friday but remained capped beneath a cluster of technical resistance levels, limiting upside momentum despite supportive supply data and a modest three-day winning streak. Traders are closely watching the $3.261 resistance and the 50-day moving average at $3.325, which are shaping up as the next potential catalysts for a breakout.

At 11:46 GMT, Natural Gas Futures are trading $3.244, up $0.049 or +1.53%.

Will Technical Resistance at the 50-Day MA Stall the Rally?

Daily Natural Gas

Prices have been pressing into a key resistance zone between $3.238 and $3.261. A confirmed close above $3.261 could open the door to a test of the 50-day moving average at $3.325—a widely watched trend signal.

If bulls can clear this level, momentum may carry the market to main swing tops at $3.459 and $3.489, with a further ceiling at $3.529. However, failure to breach these thresholds risks reinforcing selling pressure.

Support on the downside is seen at $3.063 and a broader band from $2.986 to $2.938. The secondary higher bottom at $3.063 signals buyer interest, adding a slight bullish tilt to the setup.

EIA Storage Build Matches Forecasts—Is It Enough to Sustain Gains?

Thursday’s EIA report showed a 75 Bcf build for the week ending September 19, broadly in line with consensus expectations of 74 Bcf and slightly below the five-year average of 76 Bcf. With inventories now sitting 6.1% above the five-year norm, traders found little new directional fuel from the data. Still, the report was not bearish enough to derail recent gains, extending the current winning streak to three sessions.

Weather and Supply Data Offer Mixed Signals for Demand Outlook

Near-term weather models are bearish for demand. NatGasWeather projects “low to very low” national demand through October 1, with mild temperatures across most of the U.S. Meanwhile, NOAA forecasts have shifted cooler for the East and South, reducing power burns for air conditioning.

Two tropical systems in the Atlantic—Humberto and another near Puerto Rico—remain wildcards, but for now, present limited impact risk.

On the supply side, lower-48 dry gas production hit 107.7 Bcf/day Thursday, up 6.1% year-on-year. LNG export flows remain robust at 15.7 Bcf/day, with power demand showing modest strength—electricity output rose 2.3% y/y last week, according to Edison Electric Institute.

Bullish Momentum Faces Technical and Weather Headwinds

Despite firm support at $3.063 and three consecutive daily gains, the rally remains tentative. The inability to pierce key resistance levels—especially the 50-day moving average—keeps bulls cautious.

With production running near record highs and national weather demand projected to stay weak in the near term, the market may struggle to find a sustained catalyst.

Until prices break and hold above the 50-day moving average, the outlook leans neutral to slightly bullish, with upside potential capped by lackluster demand and strong supply.