London, Reuters—The dollar and European shares fell on Thursday as market relief at a last-ditch US budget deal gave way to worries over the economic impact of the 16-day government shutdown and prospects of a re-run early next year.

The overnight deal approved by Congress, which funds the US government until January 15 and raises the debt ceiling until February 7, failed to resolve fundamental issues over spending and deficits that divide Republicans and Democrats.

“The markets are thinking, yes were not going fall off the cliff, but we’ve given ourselves another cliff in less than three months’ time,” said Simon Smith, chief economist at FXPro.

That view was shared by Chinese credit agency Dagong, which downgraded the US sovereign rating to A- from A with a negative outlook, driving further dollar losses.

Riskier assets including US and Asian share markets had initially welcomed the deal which pulled the world’s biggest economy back from the brink of a historic default, but they quickly ran out of steam when Europe opened.

MSCI world equity index, tracking shares in 45 countries, was up 0.3 percent and close to a five-year high while Europe’s broad FTSE Eurofirst index fell 0.35 percent.

European share markets were retreating from a one-month high set on Wednesday in anticipation of a US deal, with some investors choosing to lock in gains.

“The deal was widely anticipated. Over the last couple of days, the market had seen some nice gains and now people may take some profits on the announcement of the deal. It is ‘buy the rumor, sell the news thinking,” Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, said.

Currency and bond traders also focused on the likelihood that the fiscal saga would further delay the start of Federal Reserve’s planned withdrawal of its monetary stimulus.

Markets had initially expected the Fed to announce in September it would cut its bond purchases. When that didn’t happen they switched expectations to December, and now many anticipate no action until next year.

“We would expect this impasse to shave off part of fourth-quarter growth and hurt consumer confidence especially from the government sector,” said Simon Derrick, head of currency strategy at BNY Mellon. “What this does is push back expectations of Fed tapering to early 2014.”

The dollar index measuring its value against a basket of currencies slipped 0.6 percent to 80.30 having earlier set a one-month high on the initial relief that a full-blown crisis had been averted.

Against the safer alternative of the Japanese yen, the dollar fell 0.75 percent to 98.0 yen, pulling back from an earlier three-week peak of 99.01.

The dollar’s broad losses saw the euro rise 0.6 percent to USD 1.35570 and supported higher-yielding and growth linked currencies including the Australian and New Zealand dollars near recent highs.

German government bond prices, which tend to rise in times of uncertainty, tracked the US Treasury market higher, sending the 10-year Bund yield down 4.5 basis points to 1.89 percent.

The benchmark 10-year US Treasury note was holding steady at 2.6542 percent while rates on shorter term Treasury bills remained at elevated levels, reflecting the market’s unease over the truce in Washington.

Gold, which had dipped slightly once the laws to re-open the US government and allow the Treasury to borrow again were signed, was sharply higher in early European trade. Spot gold was up over two percent at USD 1,310 an ounce.

Brent crude declined 49 cents to USD 110.10 a barrel as of 08:20 GMT, with investors reluctant to take on fresh positions ahead of a deluge of data expected to emerge as Washington gets back to business.