EUR/USD dipped to about 1.1550 during Monday’s Asian session, extending its decline into a fourth day. The US dollar gained traction after Bloomberg reported that a group of centrist Senate Democrats had agreed to back a funding package to reopen the government and finance select departments and agencies through next year. Under the proposal, furloughed federal employees would receive back pay, delayed state transfers would resume, and some agencies would be funded only until January 30, while others would receive full-year budgets.
Despite this potential breakthrough, Treasury Secretary Scott Bessent warned on Monday that the economic toll of the shutdown is intensifying, even as inflation shows signs of moderating. Meanwhile, the dollar briefly softened after the University of Michigan’s Consumer Sentiment Index fell to 50.3 in November—the weakest reading since June 2022 and below the 53.2 consensus—reflecting rising public concern over the impasse.
Looking forward, EUR/USD could recover as market expectations increasingly diverge between the European Central Bank and the US Federal Reserve. Money markets now assign only a 45% chance of an ECB rate cut by September 2026—down sharply from more than 80% in October. ECB policymakers such as François Villeroy de Galhau and Joachim Nagel have argued for keeping all policy options on the table and remaining vigilant on inflation, while Vice President Luis de Guindos cautioned that any dip in inflation below 2% would likely prove transient.
