The euro struggled to recover Monday, with EUR/USD hovering near 1.1700 in early European trade as the U.S. Dollar rebounded sharply, driven by strong momentum in the USD/JPY pair, which surged more than 2%.
At the same time, traders remained cautious ahead of key Eurozone data and central bank commentary that could influence sentiment through the week.
The euro’s weakness follows a broad rebound in the dollar, which benefited from safe-haven demand amid continued uncertainty surrounding the U.S. government shutdown. Analysts noted that with limited U.S. economic data releases available during the closure, investors are leaning more heavily on global currency dynamics to gauge short-term direction.
ECB Caution May Lend Support
The euro could find limited support if the European Central Bank (ECB) maintains a cautious approach to policy. ECB policymaker Martins Kazaks said last week that current rates are “very appropriate” and should be maintained, citing high levels of uncertainty.
Investors will closely monitor upcoming remarks from ECB Vice President Luis de Guindos and Executive Board member Philip Lane later today, which could provide clues about the central bank’s inflation outlook and rate trajectory.
Market participants are also awaiting two key Eurozone indicators for early trading cues:
- Sentix Investor Confidence (October) – expected to show modest improvement after months of pessimism.
- Retail Sales (August) – forecast to reveal sluggish consumer spending momentum.
These data points could influence whether EUR/USD can stabilize above the 1.1700 threshold or extend losses toward the 1.1650 support zone.
U.S. Shutdown Adds to Market Unease
The U.S. government shutdown, now entering its second week, continues to inject volatility into global markets. Lawmakers’ repeated failure to pass a spending bill has delayed critical economic reports — including the September nonfarm payrolls data — and weighed on investor confidence.
Meanwhile, analysts believe the dollar’s rally could cool if fiscal concerns deepen or progress stalls in Congress. The uncertainty could prompt investors to scale back positions in risk-sensitive currencies.
For now, EUR/USD remains caught between a resilient dollar and cautious ECB tone, with near-term direction likely determined by shifts in U.S. sentiment and Eurozone macro signals.