Markets are struggling to gain traction this morning as the US government shutdown ends and a hawkish repricing in Federal Reserve expectations continues. Treasury yields are holding near yesterday’s levels, equity futures point to a mixed open, and the broad dollar index is edging lower as traders conclude that any boost from Washington’s return to business has largely been absorbed in market pricing.

USD: Market-implied odds on a rate cut at the Federal Reserve’s December meeting are down to just 53 percent after Boston’s Susan Collins—widely seen as a centrist on the central bank’s rate-setting committee—cautioned there is a “relatively high bar” to another move in the near term. “Absent evidence of a notable labor market deterioration, I would be hesitant to ease policy further, especially given the limited information on inflation due to the government shutdown,” she said, joining other voting members like Chicago’s Austan Goolsbee, St. Louis’ Alberto Musalem, and Kansas City’s Jeffrey Schmid in adding to the hawkish repricing in Fed expectations that has unfolded since Jerome Powell noted that a third consecutive cut was “not a foregone conclusion—far from it,” when speaking to reporters after the October decision.

It seems unlikely officials will get the full clarity they’re looking for, given that the White House yesterday warned that October’s jobs and inflation reports may not ever see the light of day. We think a pause followed by a January cut is now the most likely outcome. But private sector data is pointing to a slowing in labour markets, and with jobless claims numbers set to resume next week, the Fed’s Beige Book survey due to drop on the 26th, and a raft of alternative price measures arriving ahead of the December meeting, policymakers may yet decide they have enough information to justify making a more decisive more.

GBP: The British pound is lagging its major peers after data showed the economy losing momentum more quickly than expected in the third quarter. The Office for National Statistics reported that real gross domestic product expanded just 0.1 percent in the three months to September—down from 0.3 percent in the prior quarter and shy of expectations for a 0.2-percent increase. Household spending remained weak, business investment contracted for a second straight quarter, and gains in services were nearly erased by a drop in manufacturing output after a cyberattack disrupted operations at Jaguar Land Rover. Taken together with Tuesday’s weak payrolls figures, the numbers point to rising odds on a move at the Bank of England’s December meeting, with markets now assigning roughly an 85-percent probability to a rate cut.

CAD: The Canadian dollar is grinding higher against the greenback in line with its global peers, but is still in technically-oversold territory, trading weaker than all three of its most closely-watched daily moving averages. Canada’s fundamentals look reasonably supportive relative to the currency’s current levels, yet confidence remains muted as the Bank of Canada shifts into neutral, incoming data continue to signal a fragile recovery, and the current occupant of the White House retains access to his social media accounts. We expect incremental gains, at best, in the coming weeks.

Bottom line: Measures of implied volatility in foreign exchange markets—particularly at the one-month horizon—are beginning to pick up modestly as traders brace for a deluge when the official data drought comes to an end, but most participants expect cross-currency rate differentials to remain broadly stable into the new year, and few are prepared for another round of turbulence. Hedgers should think of this as an opportunity to exploit a degree of complacency.