As the US government shutdown finally appeared to be coming to an end, the EUR/USD currency pair reached 1.1550. During Monday’s Asian session, traders pushed the pair lower, with more folks betting that Washington’s political drama is almost over. Bloomberg reports that centrist Senate Democrats threw their weight behind a deal to reopen the government and keep funding flowing through the next fiscal year. This possible breakthrough has given the US dollar price a lift.
People expect a short-term bump in confidence now that the worst might be behind them. The deal also means federal employees get back pay, and state-level transfers—delayed for weeks—start moving again, which takes some pressure off the economy.
US Treasury Secretary Scott Bessent didn’t sugarcoat it: the shutdown has dragged on growth and momentum. Still, he pointed out progress on inflation and expects prices to cool off in the months ahead. But not everyone is convinced things are turning a corner. The University of Michigan’s Consumer Sentiment Index fell to 50.3 in November—the lowest since June 2022 — so households aren’t feeling much relief, even with better news out of D.C.
Looking forward, the US dollar could stay strong as investors try to make sense of the different approaches from central banks. The Fed isn’t in any hurry to move, keeping a cautious tone, while the European Central Bank sounds content to let rates sit tight for a while longer. ECB officials, including Francois Villeroy de Galhau and Joachim Nagel, keep stressing they’ll stay flexible and on guard for inflation changes, and they’re not too worried if inflation dips below 2%—they see it as a blip, not a trend.
