EUR/USD remains stable around 1.1560, supported by a renewed interest in the US Dollar as discussions to end the US government shutdown progress. The deal aims to fund various government departments until the end of the year and provide back pay to federal employees, which may help boost household confidence affected by recent issues.

ECB and Fed Policy Divergence

The US Consumer Sentiment Index fell to 50.3 in November, marking its lowest point since mid-2022. The differing monetary policies of the European Central Bank (ECB) and the Federal Reserve (Fed) might boost the Euro, while the US Senate moves forward with a budget bill to extend federal funding. The upcoming release of the German and Eurozone ZEW Economic Sentiment Index will shed light on the region’s economic outlook. Recently, the Sentix Investor Confidence Index dropped to -7.4 in November, making the ZEW figures essential for gauging investor sentiment. In currency news, GBP/USD is inching up to 1.3200 as risk appetite improves with growing hopes for a reopening of the US government. Gold prices have risen to over $4,100 per ounce, supported by a weaker US Dollar due to optimism about resolving the government shutdown. Additionally, Bitcoin has bounced back to $106,000, driven by a resurgence in market sentiment as US legislation progresses. With a potential deal to conclude the US government shutdown, we can expect short-term improvements in market sentiment. This development may reduce immediate concerns and could stabilize the US Dollar temporarily. Historically, markets tend to respond positively when fiscal conflicts are resolved, as seen with the brief spike in the S&P 500 after the debt ceiling was settled in early 2025.

Concerns Over US Consumer Sentiment

However, we cannot overlook the alarming decline in the University of Michigan’s Consumer Sentiment Index to 50.3, its lowest since the inflation spike in mid-2022. This weak data, alongside the recent US CPI reading for October 2025, which cooled to 2.8%, will likely exert pressure on the Federal Reserve. It strengthens the view that the Fed may need to cut rates more quickly and aggressively than previously expected. Meanwhile, the European Central Bank (ECB) seems more cautious, with officials expressing comfort with the current policy. With Eurozone inflation remaining steady at 2.5% in the latest report, the policy gap between a dovish Fed and a more patient ECB is widening. Tomorrow’s German ZEW Economic Sentiment report will be a vital test to see if business confidence in Europe diverges from the negative sentiment among US consumers. For derivative traders, this situation creates potential volatility in EUR/USD. The pair is stuck between the resolution of the shutdown and poor US data, making directional bets risky. Using options for straddles or strangles ahead of upcoming inflation or employment data could be a smart strategy to capture significant price movements, regardless of direction. A similar trend is occurring in GBP/USD as it approaches the 1.3200 level. The Bank of England faces its own challenges, as UK inflation remains high at 3.1%, complicating their ability to justify rate cuts as quickly as the Fed. This should help support the pound against the dollar in the upcoming weeks. The overall positive sentiment is also benefiting alternative assets, with Gold rising above $4,100 and Bitcoin hitting $106,000. These investments are gaining from the expectation of a weaker dollar and lower future interest rates, providing a hedge against any further decline in US economic data. Create your live VT Markets account and start trading now.

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