Insights 
VT 
The EUR/USD pair is struggling to stabilise near 1.1600, with the US Dollar holding firm. The US Dollar’s strength comes amid easing US-China trade tensions and hopes for the reopening of the federal government.
In the latest trading session, the US Dollar Index remains firm near 99.00. Comments from President Trump suggest that a consensus with China may be reached during his upcoming meeting with Chinese leader Xi Jinping.
Expectations that the US federal government shutdown could end soon have also supported the US Dollar. White House economic adviser, Kevin Hassett, speculated the shutdown might conclude this week.
ECB Speeches and Euro Concerns
Conversely, the Euro is treading cautiously as markets await speeches from ECB President Christine Lagarde and Vice-President Luis De Guindos. These discussions could impact the interest rate outlook.
The next significant development for the Euro is the European Central Bank’s upcoming monetary policy announcement, which could influence the currency’s trajectory.
We are seeing a familiar pattern in the EUR/USD, though the levels have shifted significantly since past periods of dollar strength. The pair is currently struggling around 1.0550, a stark contrast to the 1.1600 handle seen in similar market cycles back in 2018 and 2019. This persistent downward pressure is a critical factor for any strategy in the coming weeks.
Persistent Dollar Strength
The US Dollar’s strength is underpinned by solid economic data that creates a clear policy divergence with Europe. For instance, the latest US Core PCE data for September 2025 came in at 2.8%, stubbornly above the Federal Reserve’s target, while recent reports show Eurozone Q3 GDP grew by a meager 0.1%. This fundamental gap suggests that selling rallies in the EUR/USD spot market remains the favored underlying thesis.
For derivative traders, this environment points toward strategies that capitalize on continued dollar dominance. With key central bank announcements expected, options might be mispricing future movement. Current 1-month implied volatility for EUR/USD is sitting near a low 5.5%, which could make buying puts an inexpensive way to position for a potential break below the key 1.0500 psychological level.
Looking back at the market of late 2018, we saw a similar dynamic where receding geopolitical tensions and a firm Fed kept the dollar bid. The interest rate differential was a key driver then, just as it is now with the Fed funds rate holding above 5% while the ECB contemplates further easing. History shows that these periods of policy divergence can be prolonged, punishing those who try to pick a bottom in the euro too early.
