The Euro remains steady against the US Dollar, trading around 1.1745. This stability is due to weaker US economic data and a broadly weaker US Dollar. The US ISM Services PMI fell to 50 in September from 52 in August. In contrast, the Eurozone’s Composite PMI rose to 51.2 from 51. Political gridlock in the US is putting pressure on the Dollar, especially with the ongoing government shutdown affecting sentiments. The US Dollar Index is about 97.75, staying just above its weekly low. The mixed US data indicates reduced activity in services and labor demand. The ISM Services PMI is down, and the Employment Index has seen its fourth month of contraction.

Eurozone Economic Indicators

The S&P Global Services PMI slightly dropped to 54.2, showing a small loss of momentum. In the Eurozone, the HCOB Composite PMI increased to 51.2, aligning with expectations. The Services PMI went up to 51.3 from 50.5 in August. Euro growth remains modest as disinflation continues. Chicago Fed President Austan Goolsbee has expressed caution regarding policy decisions during the US shutdown. Meanwhile, ECB President Christine Lagarde highlighted unexpected strength in the Euro area, underscoring the bank’s commitment to its goals. The Euro is performing well against the Japanese Yen, with a change of 0.35%. The ongoing US government shutdown is the main factor weakening the Dollar, with the US Dollar Index hovering around 97.75. The uncertainty is rising as key data, such as the monthly Non-Farm Payrolls report, is delayed, making it hard for the Federal Reserve to gauge the economy. The difference in economic momentum is becoming clearer. The US ISM Services index dropped to the stagnation point of 50.0, while the Eurozone’s Composite PMI rose to 51.2, indicating more resilience than expected. This split is currently supporting a stronger Euro against the Dollar.

Central Bank Perspectives

We are observing a divide in central bank attitudes. Fed officials are cautious, while the European Central Bank seems more confident. The futures market suggests there’s less than a 10% chance of another US rate hike before the year’s end, whereas the ECB appears comfortable maintaining its current policy. In light of this, we should explore strategies that benefit from a rising EUR/USD in the coming weeks. Buying call options on the Euro could provide a way to capitalize on potential gains beyond the current 1.1750 resistance level, allowing for defined-risk positions if US political and economic troubles continue. We should also brace for greater price fluctuations as long as the shutdown continues. The one-month implied volatility for EUR/USD has climbed to 8.5%, the highest level since early 2024 market stress. This uncertainty can be traded using straddles, which can profit from significant price changes in either direction. Recall the 35-day government shutdown from 2018-2019; such situations can last longer than anticipated. However, any sudden resolution could lead to a sharp Dollar rally, making it wiser to use options with a fixed downside rather than holding leveraged futures positions. Create your live VT Markets account and start trading now.

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