According to Bloomberg, the EUR/USD exchange rate is holding steady around 1.1550 on Monday, following the news that the White House is backing an agreement aimed at resolving the impending US government shutdown. As the market stands, the pair is trading slightly lower at 1.1560.
US government’s plans to resume economic activity limits euro gains
The White House has indicated its support for a bipartisan deal intended to reopen the government shortly. Although the agreement was passed by the U.S. Senate, House members will need to return to Washington, as House Speaker Mike Johnson willgive them 36 hours’ notice to come back once the Senate completes the vote.
Currently, the U.S. government shutdown is in its 41st day. Market participants are closely watching speeches from Federal Reserve officials due to a lack of significant economic data available today.
Last week’s Challenger Report revealed concerning employment data, showing a notable rise in layoffs by private companies. Additionally, consumer sentiment figures from the University of Michigan indicated that households are becoming more pessimistic about the economic outlook.
In Europe, there hasn’t been much communication from speakers and policymakers, including François Villeroy de Galhau and Joachim Nagel of the European Central Bank (ECB), with Vice President Luis de Guindos leading the discussions.
Daily market update: EUR/USD remains stable as the US government aims to restart economic activity
- The U.S. dollar index (DXY), which tracks the dollar against six other currencies, is stable at 99.56.
- The Trump administration has come out in favor of a bipartisan deal that was approved to end the government shutdown on Sunday.
- Fed Governor Stephen Milan has a dovish stance, considering a 50bps rate cut during the December meeting. Meanwhile, St. Louis Fed’s Alberto Moussallem believes the economy remains resilient, noting inflation is closer to 3% than 2%.
- Mary Daley from the San Francisco Fed remarked earlier that commodity inflation seems “fairly contained,” although she acknowledged that recent rate cuts have pressured prices upward while supporting the labor market.
- October saw 153,000 layoffs announced, marking the highest level for that month in two decades, according to the Challenger Report. In money markets, there’s now about a 66% chance the Federal Reserve will cut rates in December, up from 62% the previous week, reflecting growing expectations for policy adjustments due to cooling labor market signals.
- The differing monetary policies between the European Central Bank and the Federal Reserve suggest further potential for EUR/USD gains.
- Luis DeGuindos of the ECB noted on Monday that current interest rates are “appropriate,” pointing to inflation approaching the 2% target. Other officials, however, have warned about remaining cautious towards persistent price pressures.
- Looking forward, investors will observe the ZEW Economic Sentiment Index for Germany and the Eurozone set to be released on Tuesday, hoping for more insights into the area’s growth potential.
Technical outlook: EUR/USD expected to stay below 1.16
Despite some bullish momentum recently, EUR/USD is likely to trend downwards as sellers appear to lack the strength to push the rate towards the 200-day simple moving average (SMA) of 1.1350.
If the pair remains under the significant resistance of the 20-day SMA at 1.1592, levels such as 1.1600 will likely stay unattainable, with a recovery towards 1.1700 anticipated afterward.
On the flip side, should EUR/USD dip below 1.1500, it might test the cycle low from August 1st at 1.1391.
