But don't mistaken the government shutdown is not actually positive for U.S. assets. Instead, it is the delay of U.S. government releases that gives the market relief. No news is good news.
Major reports such as retail sales and the trade balance have been delayed due to the shutdown and while government shutdowns don't tend to inflict lasting damage on the economy, its never gone on for this long. Now in its fourth week, the shutdown could take more than 0.5% off growth as 800,000 government workers who are not getting paid reduce spending and investment.
But the stalemate could end soon as the Trump Administration grows anxious.
Its not clear how long much longer President Trump will put the economy and the country in limbo through his attempt to strong arm the Democrats in providing funds to build a border wall. If the stalemate ends and the government reopens, the US dollar will rally but if it continues, USD/JPY will take its cue from risk appetite while other major currencies react to local data. The Bank of Japan has a monetary policy announcement this coming week. No monetary changes are expected but the central bank could lower its 2019 inflation and growth projections.
Meanwhile sterling fell sharply on Friday ahead of the government's release of Plan B.
Taking a look at the options for plan B, May really has no choice but to ask the EU for more time, which is why by Monday, Article 50 should be extended.
But an extension can't be the only element of Plan B. May will need to decide what course to take in the coming months - either a Norway style model or a permanent customs union or relent to a second referendum - all of which should be positive for GBP.
However, after winning her no confidence vote, May made it clear that leaving with no deal cannot be ruled out. Although unlikely, if she does not request for an extension, paving the way for a no deal Brexit. GBP will crash even if Parliament responds by taking control of Brexit negotiations. After that, Parliament is scheduled to debate and vote on Plan B a week later on January 29th.
What is Plan B - 3 Main Scenarios
Delayed Exit Request > Leading to Norway style deal or permanent customs union
Delayed Exit Request > Leading to second referendum
No Delay Exit Request > No deal Brexit
Reference: FX Street
Read More: https://www.fxstreet.
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