EUR/USD Slips as Dollar Gains on Optimism
7 min read
Share
EUR/USD edged lower to trade around 1.1560[1] in early Tuesday's trading after four consecutive sessions of gains. The pair's pullback is believed to indicate a strong US dollar[2] again with expectations of an end to the long US government shutdown. A 60-40 vote in the US Senate[3] to pass a bipartisan funding bill, endorsed by both sides, was an indication of a step towards reviving federal operations. The support given to the deal by President Donald Trump[4] also lent some credibility to the greenback in the short-term perspective of it being resolved.
Market commentators[5] note that the overall US dollar picture is still tainted by economic uncertainty and dovish Federal Reserve (Fed) speculation. The markets are becoming priced in on a December rate cut and the CME FedWatch Tool[6] shows a probability of a 25-basis-point cut at 62%. The remarks of Fed Governor Stephen Miran[7] that inflation is contained and could potentially be cut by 50 bps in December contributed to the speculation that policy easing could go on in early 2026. This, together with poorer US data, may constrain the Dollar in the forthcoming weeks.
In Europe, market reports[8] indicate that the euro can stabilize since traders are awaiting the German ZEW Economic Sentiment Index, a major measure of regional business confidence. Moderate growth and inflation around target expect the European Central Bank (ECB)[9] to hold on to its existing rate policy. ECB Vice President Luis de Guindos again hinted that the policy must take it slow and no more stimulus is to be rushed out.
Analysts[10] show that the EUR/USD is range bound and the short term support is in the 1.1530 mark and opposition is in the 1.1600 mark. Although there is a risk of the upside momentum being capped by the short-term US dollar demand, weak US data or dovish signalling[11] by the Fed might be able to offer a floor to the pair, placing the medium-term bias slightly towards euro strength. Overall, traders are likely to remain cautious as they await further economic cues from both sides of the Atlantic, which could define the next directional move in the EUR/USD exchange rate.
USD/CAD Rebounds as Dollar Strengthens on Optimism
USD/CAD extended its rebound trading near 1.4030[12] in Tuesday's Asian session after two consecutive days of losses. The pair is believed to have gained momentum when the US dollar strengthened with the US senate[13] making moves to pass a bipartisan deal to reopen the government. The support of the bill by the US President Donald Trump[14] has boosted market confidence, as it is hoped that the shutdown would be resolved in days. The growth has offered short term support to the greenback with new hope of fiscal stability.
Market commentators[15] highlight that comments by Fed officials on the monetary policy front also influenced the sentiment of the US dollar. Fed Governor Stephen Miran[16] said that inflationary pressures were calming down and confirmed that rate reductions are correct, hinting at a 25-50 basis point cut in December. Meanwhile, the statements by St. Louis Fed President Alberto Musalem[17] that inflation is more than 3% than the 2% target cooled anticipations of vigorous reduction. These mixed messages held traders on their toes capping the upside of the US dollar despite the good fiscal news.
Market reports[18] point out that market fundamentals provided a counterbalance in the case of the Canadian dollar. In Canada, the Unemployment Rate fell to 6.9% in October whereas Employment Change[19] increased by 66.6K beating the projections. Strong labour market figures reinforced speculation that the Bank of Canada (BoC) can halt its easing process and provide medium-term assistance to the loonie. But sluggish international demand and low commodity prices keep capping CA dollar profits.
Analysts suggest that the focus moving forward is on future US economic reports, such as Consumer Price Index (CPI) and Retail Sales[20] data. Any indication of declining inflation or declining consumption may apply pressure on the US dollar[21], as the currency approaches 1.3980, whereas any long-term optimism about the strength of the US government may continue to bias the pair in the short term. Overall, the evolving economic indicators and policy outlooks from both nations are expected to keep traders closely watching the USD/CAD exchange rate for further directional cues in the coming sessions.
NZD/USD Slips as RBNZ Holds Steady
The NZD/USD pair traded under pressure near 0.5640[22] in Tuesday’s Asian session, extending its decline after the Reserve Bank of New Zealand’s (RBNZ) latest monetary conditions survey. It is believed that the New Zealand dollar[23] lost traction as the central bank’s two-year inflation expectations for Q4 remained unchanged at 2.28%, while one-year expectations ticked marginally higher to 2.39%. The muted response indicates that inflation expectations remain anchored, reducing the likelihood of further near-term tightening by the RBNZ[24] and weighing slightly on the kiwi’s appeal.
Market reports[25] point out that the US dollar found modest support after the US Senate passed a bill that could end the government shutdown, which now moves to the House of Representatives. Market sentiment improved after President Trump[26] signalled backing for the bipartisan deal, raising hopes that federal operations could resume within days. The potential resolution of the political stalemate is viewed as mildly US dollar-supportive, as it alleviates uncertainty around government spending and upcoming data releases.
Market commentators[27] point out that attention now shifts to the US ADP Employment Change report later today and the delayed Nonfarm Payrolls (NFP) data, both seen as key indicators of labour market strength. A stronger-than-expected reading could reinforce the dollar’s position[28], while any signs of labour market softness may cap upside momentum and lend temporary support to the kiwi.
From a technical perspective, analysts indicate that NZD/USD[29] faces immediate resistance near 0.5670, while support lies at 0.5610. The broader outlook remains cautious, with short-term volatility likely driven by US labour data[30] and ongoing risk sentiment. Unless US data disappoints significantly, the pair may struggle to regain upward traction in the near term. Overall, the NZD/USD exchange rate is expected to remain range-bound in the short term, with directional cues likely dictated by upcoming US economic releases and shifts in market sentiment.
AUD/USD Slips as Dollar Strengthens on Optimism
The AUD/USD pair slipped to trade around 0.6530[31] in Tuesday's trading session, retreating after two consecutive sessions of gains. It is believed that the greenback found renewed support amid optimism that a resolution to the US government[32] funding impasse may soon be reached. This sentiment lifted Treasury yields and underpinned the dollar, offsetting earlier weakness from mixed US data.
Market commentators[33] point out that domestically, sentiment indicators offered a brighter picture for the Australian economy. Westpac Consumer Confidence[34] jumped 12.8% in November to 103.8, its first reading above 100 since early 2022, signalling improved household optimism. Meanwhile, National Australia Bank’s Business Conditions index[35] inched higher to 9 in October, supported by resilient sales and profitability. However, Business Confidence eased slightly, reflecting lingering caution over external headwinds and domestic cost pressures.
Market reports[36] point out that comments from Reserve Bank of Australia (RBA) Deputy Governor Andrew Hauser added modest support to the Australian dollar, as he reiterated the need for tight monetary policy to combat inflation. Hauser acknowledged the complex backdrop facing policymakers[37], emphasizing that the economy remains constrained by capacity limits, reducing the scope for near-term rate cuts. Despite this, traders remain sensitive to shifts in global risk sentiment and US macro developments.
From a technical standpoint, analysts[38] indicate that AUD/USD continues to consolidate within a rectangle pattern on the daily chart. The immediate resistance is seen at the 50-day EMA[39] around 0.6536, with a break higher potentially opening the door to 0.6630 and 0.6707. On the downside, initial support lies near 0.6520 and 0.6500. Upcoming US inflation and retail sales data[40] later this week could influence near-term direction, with soft readings likely to limit dollar gains and offer temporary relief to the Aussie. Overall, traders are expected to remain cautious ahead of key US data releases, which could set the tone for short-term movements in the AUD/USD exchange rate.
Stay Ahead in the Currency Game
Whether you're a daily FX trader or handle international transactions regularly, our 'Currency Pulse' newsletter delivers the news you need to make more informed decisions. Receive concise updates and in-depth insights directly in your LinkedIn feed.
Subscribe to 'Currency Pulse' now and never miss a beat in the currency markets!
Ready to act on today’s insights? Get a free quote or give us a call on: +44 (0)20 7740 0000 to connect with a dedicated portfolio manager for tailored support.
Important Disclaimer: This blog is for informational purposes only and should not be considered financial advice. Currency Solutions does not take into account the investment objectives, financial situation, or specific needs of any individual readers. We do not endorse or recommend any specific financial strategies, products, or services mentioned in this content. All information is provided “as is” without any representations or warranties, express or implied, regarding its accuracy, completeness, or timeliness.
