The dollar initially weathered the U.S. government shutdown. However, with the FAA now actively canceling flights, the negative GDP impact is becoming more tangible and less likely to be recovered quickly, increasing downside risk for the currency.

A prolonged shutdown leaves the data-dependent Federal Reserve "flying blind." This uncertainty, combined with the shutdown's negative economic impact, creates a downside risk that reinforces the case for monetary easing. The lack of new data makes it easier to continue the current cutting cycle.

Unlike the 2018 shutdown, the Bureau of Labor Statistics may not have funding this time, potentially halting the release of non-farm payrolls and CPI data. This would leave the highly data-dependent Federal Reserve and markets "flying blind" at a critical monetary policy juncture.

Shutdowns halt the release of key data like jobs reports and inflation figures. This obstructs the Federal Reserve's ability to make informed interest rate decisions, creating market uncertainty. It also delays Social Security COLA calculations, impacting millions of retirees who rely on that data.

The direct GDP impact from furloughed federal workers is small, mechanical, and quickly reversed. The more significant and lasting economic damage from a prolonged shutdown stems from its effect on the private sector, such as backlogged IPOs at the SEC or delayed construction projects waiting on permits.

The absence of key data releases like non-farm payrolls during a government shutdown reduces market-moving catalysts. This artificially lowers volatility, creating a stable environment conducive to running carry trades and maintaining existing positions like dollar shorts, contrary to expectations of increased uncertainty.

The shutdown jeopardizes the release of the October WASDE report, a key source for U.S. crop yield data. Without this formative guidance, traders and analysts are "flying blind," increasing market uncertainty and the risk of price volatility at a critical time in the season.

The government's failure to release key economic reports (jobs, GDP, inflation) creates a dangerous information vacuum, forcing the Fed and businesses to operate without instruments. This void presents a significant business opportunity for private companies to develop and sell alternative economic data streams and forecasting models to fill the gap.

The Federal Reserve is not 'flying blind' during government shutdowns that halt official statistics. It uses a composite of alternative indicators for the labor market and inflation, providing enough of a signal to stick to its pre-planned policy path, such as proceeding with scheduled interest rate cuts.