"The EURUSD pair is facing significant downward pressure as the U.S. dollar continues to be supported by safe-haven flows and expectations that the Federal Reserve (Fed) will temporarily maintain a stable monetary policy stance amid the ongoing U.S. government shutdown. Meanwhile, the European Central Bank (ECB) is struggling with the prospect of prolonged economic stagnation. After a period of consolidation, EURUSD has slipped below 1.17, reflecting the widening divergence between the U.S. and eurozone economies."
"In the United States, despite the government shutdown, recent indicators such as the ISM Manufacturing Index and consumer confidence data suggest that the economy has retained a certain degree of resilience. Meanwhile, U.S. Treasury yields have slightly declined but remain relatively elevated, allowing the dollar to maintain its strength against most major currencies. By contrast, the eurozone's economic outlook remains subdued."
"Although headline inflation across the bloc has eased close to 2%, weak consumer demand, slowing credit growth, and the risk of a technical recession are making it difficult for the ECB to maintain a hawkish stance. If growth fails to improve soon, the ECB may be forced to consider another small rate cut in early 2026 - a move that would exert further downward pressure on the euro."
EurUSD is under downward pressure as a strengthening U.S. dollar benefits from safe-haven flows and expectations that the Federal Reserve will temporarily hold policy steady amid the U.S. government shutdown. The eurozone faces weak growth, with EURUSD falling below 1.17 as economic divergence widens. U.S. indicators such as the ISM Manufacturing Index and consumer confidence point to resilience, while Treasury yields remain relatively elevated. Eurostat data show Q2 2025 GDP growth of only 0.1% quarter-on-quarter and PMI weakness in Germany and France. Weak demand, slowing credit, fiscal disputes, and widening peripheral spreads increase downside risks for the euro.
Read at London Business News | Londonlovesbusiness.com
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