Insights 
VT 
EUR/USD continues its downward trend, reaching near 1.1500 during the Asian market hours on Tuesday. This decline follows a stronger US Dollar, as cautiousness surrounds the US Federal Reserve’s policy approach for December. Recently, Fed Chair Jerome Powell stated that a rate cut in December is uncertain and advised caution until official data release resumes. The likelihood of a December rate cut has decreased to 65% from 94% over the week, per CME FedWatch Tool.
The US economy faces potential challenges due to an extended government shutdown now in its sixth week. This deadlock in Congress over the Republican-backed funding bill leaves federal workers unpaid and intensifies economic uncertainties. In Europe, the EUR/USD rate might find some balance due to expectations of the European Central Bank (ECB) maintaining steady interest rates this year. The ECB recently kept rates unchanged, as expected, citing a stable inflation outlook and continued economic growth despite uncertainty. Eurozone inflation slightly exceeded the 2% target, and GDP growth surpassed estimates in the third quarter, with business sentiment seeing improvements in October.
ECB Policy Approaches
ECB policymakers noted their current strong position, yet remain adaptable should future economic conditions change. They emphasise a balanced approach to inflation and growth risks, avoiding rapid policy responses.
As of today, November 4, 2025, we see the EUR/USD pair showing weakness, having fallen for five straight days to near the 1.1500 level. This dollar strength is coming from the Federal Reserve’s cautious tone, which has dampened expectations for a rate cut next month. According to the CME FedWatch Tool, the probability of a December rate cut has fallen to 65%, a significant drop from 94% just last week.
This dollar rally, however, is on shaky ground because of the ongoing US government shutdown, now in its sixth week. This situation is creating real economic uncertainty, which reminds us of the 35-day shutdown in 2018-2019 that shaved an estimated 0.2% from quarterly GDP growth. The continued impasse could easily start to weigh on the dollar, making sustained gains difficult.
Impact of Economic Factors
Meanwhile, the Euro is finding a level of support because the European Central Bank is expected to remain on hold for the rest of the year. Recent data has been encouraging for the ECB, with October’s inflation in the Eurozone coming in at 2.4%, only slightly above their target. This, combined with better-than-expected GDP growth of 0.3% in the third quarter, gives policymakers room to wait and see.
For derivative traders, this conflict between a hesitant Fed and a US domestic crisis suggests a rise in implied volatility. The push and pull between these major themes makes a sharp move in either direction more likely. Buying options strategies like straddles could be a way to position for a significant breakout, regardless of the direction.
The 1.1500 mark is now a critical psychological level for the pair. Given the economic drag from the shutdown, any surprisingly weak US data could trigger a sharp rebound from this support. We believe that traders could use this level as a pivot point for positioning, perhaps using call spreads to bet on a short-term bounce.
Ultimately, the most important factors to watch in the coming weeks will be any developments on the US funding bill and the release of any official economic data. The shutdown has delayed some reports, so any new figures on employment or inflation will have an outsized impact on market sentiment. This makes paying close attention to the economic calendar more important than ever.
