Developments over the weekend point toward a path to ending the US government shutdown. The prospect of significant flight delays over Thanksgiving, along with delays in food assistance payments, appears to have prompted a group of moderate Democrats to back a compromise bill proposed in the Senate. However, this compromise falls far short of Democratic demands to postpone the expiration of healthcare subsidies under Obamacare and may still be rejected by House Democrats. The next 48 hours in Congress will determine the success of this initiative. US stock futures rose by about 1% following the news, and Asian stock futures also performed well on Monday, according to Chris Turner, a foreign exchange analyst at ING Bank.

The US Dollar Index may not return above the 99.90/100.00 level for some time.

Forex markets reacted by a roughly 0.5% rise in the risk-sensitive Australian Dollar (AUD). As we mentioned last week, interest rate crosses like the AUD/JPY pair have the highest correlation with the US Nasdaq, which rose by about 1.2% today. The USD/JPY pair is approaching the 154 level again, and the likelihood of a Bank of Japan interest rate hike in December is fading due to the yen's use as a funding currency.

While some might argue that the end of the government shutdown could be a risk-on factor and negative for the US Dollar in the currency markets, its impact may be more complex. Late last week, the US Dollar came under pressure due to layoffs and statements that the US economy could contract in the fourth quarter if the shutdown continued. Meanwhile, weak US consumer confidence data released on Friday was interpreted as negative for the Dollar. Progress in ending the lockdown may be driven more by cross-currency movements in risk-sensitive foreign exchange rates than by the dollar.

Aside from politics, this week is exceptionally quiet in US data, and tomorrow is a public holiday for Veterans Day. Where data is available, the focus will be on the National Federation of Businesses' (NFIB) Small Business Optimism Index, due tomorrow. Several Federal Reserve speakers will also be speaking. The probability of a 25-basis-point Fed rate cut in December has fallen to 64%. Without US data, this probability could drop to around 50%, as Fed spokespeople typically indicate a need to slow down the pace of rate cuts. If last week's surge to 100.36 by the US Dollar Index (DXY) was significant, it is now unlikely to break above the 99.90/100.00 range.