EUR/USD trades slightly lower around 1.1560 during Tuesday’s Asian session, pausing its four-day winning streak as the US Dollar (USD) finds renewed strength.
The greenback draws support from optimism that the US government shutdown may soon end after the Senate passed a funding bill late Monday, effectively concluding the 41-day standoff. The measure, approved by a 60–40 vote with eight Democrats joining Republicans, now moves to the House of Representatives for final approval.
USD supported by optimism over shutdown resolution
US President Donald Trump has backed the bipartisan funding deal, signaling that a formal reopening of government operations could happen within days. Senate Majority Leader John Thune also indicated that Trump is expected to sign the bill once it clears Congress.
The prospect of an imminent resolution has boosted market confidence in US fiscal stability, lending modest support to the dollar.
Fed policy expectations limit dollar gains
Despite the temporary rebound, the USD remains constrained by mounting expectations of Federal Reserve policy easing. According to the CME FedWatch tool, markets currently price in a 62% probability of a 25-basis-point (bps) rate cut in December.
Fed Governor Stephen Miran reinforced the dovish tone in comments to CNBC on Monday, stating that inflation continues to ease and the labor market remains below full employment. Miran suggested that a 50-bps or at least a 25-bps rate cut in December would be appropriate, emphasizing that recent data support continued monetary easing.
ECB outlook and ZEW data in focus
On the European side, the euro could find near-term support from the European Central Bank’s (ECB) cautious policy stance. ECB Vice President Luis de Guindos reiterated on Monday that current interest rates are “appropriate,” adding that the central bank must remain “prudent and cautious,” even as uncertainty eases following the recent US–EU trade agreement. Traders will closely watch Germany’s ZEW Economic Sentiment Survey later today for further direction on the euro.
Money markets currently assign only a 40% probability of an ECB rate cut by September 2026, reflecting confidence that inflation is near target and economic activity remains steady. A stronger-than-expected ZEW reading could help the EUR/USD pair recover from its early-week losses, while weaker sentiment data may reinforce near-term downside pressure.
