The euro (EUR) faced some pressure against the US dollar (USD) on Monday, as the dollar gained strength amid optimism about potential easing of trade tensions between the US and China.
Currently, EUR/USD is holding steady above 1.1650. At the same time, the US Dollar Index (DXY), which measures the dollar’s value against six major currencies, is around 98.50, recovering from a two-week low hit last Friday.
In a Monday speech titled “How to revive Europe’s growth,” European Central Bank (ECB) board member Isabel Schnabel expressed cautious concerns, noting that the eurozone is falling behind in the digital arena, with productivity growth remaining stagnant when compared to the United States.
Schnabel highlighted that Europe’s competitive position is at risk, particularly due to increasing energy prices and a shrinking share of the export market against the US and China. To restore long-term growth and ensure effective monetary policy, addressing these underlying weaknesses is vital, she emphasized.
On the US front, interest is high around the restart of US-China trade discussions. U.S. Treasury Secretary Scott Bessent and Chinese Vice Premier He Lifeng are set to meet in Malaysia this week after last week’s tariff increases heightened tensions. Although the current situation has somewhat improved market sentiment, there’s still trepidation among traders due to the unpredictability of US President Donald Trump’s trade remarks, which leave global markets in uncertainty. Investors are particularly cautious about the possibility of further tariff hikes, especially since Trump warned on Monday that “if no deal is reached, 155% tariffs could be implemented on November 1st.”
At the same time, a dovish outlook from the Federal Reserve and the ongoing government shutdown are curbing the dollar’s upward momentum. Political stalemate in Washington has now entered its third week, with Congress preparing for an 11th vote on a temporary funding bill to reopen the government. White House advisor Kevin Hassett shared on CNBC that he anticipates the government shutdown may conclude “sometime this week.”
