**EUR/USD Stability and Economic Influences** The EUR/USD pair is stable as we await the Eurozone’s Harmonized Index of Consumer Prices (HICP) release. Currently trading at around 1.1730, it has seen recent gains. Markets forecast a 2.2% yearly increase in September HICP. In the U.S., government funding is set to expire at 04:00 GMT on Wednesday, raising the risk of a government shutdown that could impact 750,000 federal workers. If this happens, the U.S. Labor Department will halt important data releases, including the monthly jobs report. The EUR/USD may strengthen as the U.S. Dollar faces pressure due to expectations of rate cuts by the Federal Reserve. According to the CME FedWatch Tool, there is nearly a 97% chance of a rate cut in October and a 76% chance in December. Job openings saw a slight uptick in August, but the hiring rate dropped to 3.2%, the lowest since June 2024. The Euro remains the second most traded currency, managed by the European Central Bank (ECB). Inflation and economic data play a crucial role in determining the Euro’s value. Strong economies and positive trade balances generally boost the Euro’s strength. Economic data from key Eurozone countries is particularly significant, representing 75% of the area’s economy. **Market Drivers and Volatility** Today, October 1st, 2025, brings two significant events that could shake up the market. A potential U.S. government shutdown is starting today, alongside important Eurozone inflation data. This creates a challenging but opportunity-filled environment for EUR/USD traders. The U.S. Dollar is already vulnerable, with markets pricing in a 97% chance of a Federal Reserve rate cut this month. A government shutdown will increase this uncertainty, reminiscent of the 35-day shutdown in late 2018 and early 2019, which led to market volatility and reduced investment in U.S. assets. The suspension of critical data, like the jobs report, will leave traders without essential insights into the U.S. economy. On the other hand, the Eurozone’s inflation report might indicate a 2.2% rise in consumer prices, surpassing the European Central Bank’s 2% target. Eurozone inflation has remained stubborn throughout 2024, and an even higher reading may force the ECB to maintain stricter policies compared to the Fed. This difference between a dovish Fed and a possibly hawkish ECB could be the key factor driving a stronger Euro. Given this context, we anticipate increased volatility for the EUR/USD pair. Derivative traders might explore strategies that benefit from price swings, such as buying straddles or strangles, which can yield profits regardless of the market’s direction. Implied volatility for EUR/USD options has already reached a three-month high due to these upcoming events. For those with a specific outlook, the likely trend for EUR/USD appears to be upward. A government shutdown, combined with high Eurozone inflation, could easily push the pair through existing resistance levels. Buying call options on EUR/USD could be a way to take advantage of this potential rise while managing risk. However, the situation remains fluid. Last-minute funding deals in Washington could lead to a quick rebound for the dollar. Likewise, a surprisingly low inflation report from the Eurozone could weaken the case for a stronger Euro. Using option spreads to mitigate potential losses is a wise strategy in this unpredictable environment. Create your live VT Markets account and start trading now.

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