Insights 
VT 
Eurozone Economic Factors
The EUR/USD pair remains stable near 1.1740, influenced by a US government shutdown delaying key economic reports, such as Nonfarm Payrolls. The pair trades at 1.1738, up 0.28%, amid quiet trading. The shutdown affects market activities, with Federal Reserve officials divided on their approach. Lorie Logan is hawkish due to persistent inflation concerns, while Stephen Miran favours a cautious approach, citing the need for data access.
Economic indicators released include the Purchasing Managers Index (PMI) for September, with ISM showing a neutral stance and S&P Global revealing modest economic expansion. The ISM Services PMI fell below expectations, while S&P Global’s PMI witnessed a slight decline but remained stronger than anticipated. Money markets anticipate a 25-basis-point rate cut by the Fed, with a 96% likelihood. The Eurozone economy continues to be closely watched, with inflation rates potentially affecting the European Central Bank’s (ECB) monetary policy decisions.
EUR/USD fluctuates above 1.1700 for its fifth consecutive day, with bullish potential if it surpasses key resistance levels. A drop below 1.1700 could lead to further declines targeting support levels. As the second most traded currency, the Euro remains significant, accounting for a substantial share of global foreign exchange transactions. Economic health indicators and ECB policies play a substantial role in its valuation.
Impact Of Monetary Policies
Given the US government shutdown is delaying key economic data as of October 4, 2025, we are facing significant uncertainty. The market is pricing in a 96% chance of a Federal Reserve rate cut on October 29, but Fed officials themselves are divided. This creates a tense environment where derivative strategies should focus more on volatility than on pure direction.
The conflicting data we do have, with the ISM Services PMI at a weak 50 while the S&P Global survey shows resilience, fuels this uncertainty. With the last available Core PCE reading from August 2025 holding at 3.8%, well above the Fed’s target, hawkish officials have a strong case against cutting rates. This suggests that the market’s high certainty about a cut could be misplaced, creating an opportunity for a sharp repricing.
For traders expecting the Fed to follow through with the market’s priced-in cut, buying EUR/USD call options with a strike above the 1.1780 resistance level is a viable play. This strategy positions for a weaker dollar if the dovish camp wins out or if delayed economic reports eventually show a slowing economy. An expiration date after the October 29 Fed meeting would be appropriate to capture the event.
Conversely, the persistent underlying inflation and hawkish comments from officials like Lorie Logan suggest a potential for a surprise hold on rates. We could position for this by purchasing EUR/USD put options with a strike below the 1.1700 support level. If the Fed disappoints the market by not cutting, we could see a rapid move toward the 100-day moving average near 1.1605.
On the European side, with the latest Eurozone HICP inflation for September 2025 coming in at 2.7%, the European Central Bank remains in a holding pattern. This makes the EUR/USD pair almost entirely dependent on the US dollar’s story in the coming weeks. Therefore, our focus should remain on the resolution of the US shutdown and the subsequent Fed decision.
Given the potential for this data blackout to extend, similar to the 35-day shutdown we saw back in 2018-2019, volatility is likely to rise. The EUR/USD currency volatility index (CVIX) has already climbed to 8.5, its highest level in three months. Buying straddles or strangles with expirations in mid-November allows us to profit from a large price swing in either direction once the shutdown ends and delayed data is finally released.
