EUR/USD is trading around 1.1720 during Monday’s Asian session, giving back some of last session’s gains. However, the downside seems restricted as the US Dollar (USD) faces pressure amid rising expectations of Federal Reserve (Fed) rate cuts. According to the CME FedWatch Tool, markets now price in a 95% chance of a rate cut in October and an 84% probability of another in December.
The Greenback’s recovery is further capped as the US government shutdown continues. Lawmakers have failed for the fourth time to pass spending bills to reopen the federal government, extending the closure into another week. This has led to the suspension of key federal programs and a delay in major economic reports, including September’s jobs data originally due last Friday.
Meanwhile, the Euro (EUR) may find some support as the European Central Bank (ECB) maintains a cautious policy stance. ECB policymaker Martins Kazaks recently said that current interest rate levels are “very appropriate” and can be maintained, though uncertainty remains high.
Traders now await comments from ECB Vice President Luis de Guindos and Executive Board member Philip Richard Lane later today. Additionally, focus will turn to the Eurozone’s Sentix Investor Confidence and August Retail Sales data for fresh trading cues.
