Euro’s Market Performance

The exchange rates show how the Euro is doing against major currencies, particularly weakening against the Australian Dollar. The heat map displays percentage changes in major currencies, highlighting the Euro’s significant decline against others, such as the US Dollar and Canadian Dollar. Gold has dropped to about $3,930 after reaching a high of $3,950. Its value is affected by a safe haven demand during uncertain political and economic times. FXStreet provides valuable insights into the currency market and current economic conditions. This information is for educational purposes only and should not be taken as investment advice. Individuals are responsible for their own investment choices. Today’s Sentix investor confidence for October improved sharply to -5.4. However, the EUR/USD has fallen to around 1.1650. This suggests that the market is ignoring the good news and focusing instead on ongoing issues in the Eurozone. The gap between positive future expectations and a troubling current situation is a warning sign. Political instability in France over their 2026 budget deficit is weighing heavily on the Euro. Meanwhile, the US government shutdown has surprisingly boosted the dollar as investors seek safety, similar to what we saw during the shutdown in fall 2023. The influx of capital into US Treasuries is overcoming any concerns about the shutdown itself.

Euro Outlook and Trading Strategies

Last week’s flash manufacturing PMI for the Eurozone was 46.2, indicating a contraction for the fifteenth month in a row, as it remains below the 50-point mark. Although the headline inflation has eased to 2.5% year-over-year, the weakness in core industrial activity explains the negative ‘Current Situation’ rating in the Sentix survey. This indicates that the recovery is inconsistent and not strongly supported by the private sector. The report mentions an economy propped up by ‘armaments,’ signaling that the recovery is driven by government defense spending rather than healthy consumer and business sectors. Major European defense contractors have seen their order books expand since the Ukraine conflict escalated in 2022, but this growth is not sustainable for the overall economy. Given the mix of data and high political risks, short positions on the Euro may quickly reverse with any positive news. A wiser strategy for the upcoming weeks would be to use options to express a bearish outlook, like purchasing EUR/USD put spreads. This tactic helps manage risk while allowing us to profit from potential further declines towards the 1.1500 level. The Euro’s significant drop against the Australian Dollar is also a crucial trade to monitor, with a 0.70% decrease today. Australia’s strong position as a commodity exporter benefits from steady demand for raw materials like iron ore, which remains above $110 per tonne. We should explore shorting EUR/AUD, as this cross-rate captures both the Euro’s weakness and commodity-linked strength. The European Central Bank will likely stay dovish in this context, as weak industrial data and political challenges make tightening impossible. In contrast, the Federal Reserve is still expected to keep rates higher for longer to tackle its own inflation issues, despite the shutdown. This difference in policy will continue to pressure the Euro downwards. Create your live VT Markets account and start trading now.

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