- The EUR/USD is set to continue its gains for the third consecutive year as the US dollar struggles.
- Weaker US consumer sentiment and potential government shutdown worries are weighing on the dollar.
- While job openings from the JOLTs report were unexpectedly high, this did not bolster the US dollar.
The euro is currently strengthening against the US dollar on Tuesday, with the EUR/USD pair recovering from previous losses as the dollar remains on the back foot after recent US data. Lower-than-expected consumer confidence numbers and apprehensions regarding a possible US government shutdown have kept the dollar shaky, allowing the euro to bounce back from its earlier dip.
As of now, the EUR/USD is trading around 1.1743, achieving gains for the third straight day. In contrast, the US Dollar Index (DXY)—which gauges the dollar’s performance against a basket of six major currencies—is hovering near 97.75, down about 0.20% for the day.
Recent data released indicated that the consumer confidence index dropped to 94.2 from an August revision of 97.8, suggesting a decline in consumer optimism. Additionally, the JOLTs Job Openings report for August exceeded expectations slightly, tallying 7.227 million job openings, a revision from 7.181 million in July.
Despite the positive surprise in job openings, the dollar struggled to gain traction. Investors appear more concerned about ongoing issues with consumer confidence and a slowing labor market.
Boston Federal Reserve President Susan Collins shared on Tuesday that the current “conservatively restricted” monetary policy is fitting for now. However, she did leave the possibility for future rate cuts open, depending on upcoming data. Collins expressed support for the Fed’s recent interest rate reductions, citing the challenges facing the central bank in fulfilling its dual mandate. While she acknowledged that inflation risks remain, she noted that the pressure on prices is diminishing.
She characterized the general economic outlook as “relatively benign,” predicting that inflation will continue to rise until next year before tapering off. She also anticipated that employment would improve as businesses adjust to tariffs, but she cautioned that reduced labor demand could lead to higher unemployment. Collins stressed that the Fed’s policy decisions will continue to rely heavily on data.
