The EUR/USD remains steady at around 1.1590 as market participants anticipate a House vote on a bill to end the extended US government shutdown. Throughout the discussions, varied messages emerge from Federal Reserve officials, indicating potential balance-sheet expansion while maintaining a focus on price stability.

The bill passed by the US Senate aims to end the shutdown and will soon be presented to the House of Representatives, with a vote expected around 7:00 PM ET. The approval would allow for the release of pending economic data, excluding October’s inflation and employment figures. Simultaneously, Federal Reserve discussions highlight the conflict between supporting the labour market and tackling persistent inflation.

German Inflation and the US Dollar

In Germany, inflation remains around the European Central Bank’s 2% target, aligning with policy paths of diverging central banks. The US Dollar Index shows minimal change, holding steady at 99.49, with employment data indicating potential labour market weaknesses. Additionally, private sector job cuts have intensified recently, raising concerns over employment stability.

In terms of monetary policy, markets assign a 60% probability of a rate cut in December. European Central Bank figures express caution about persistent inflation risks, despite mild easing in German price pressures, and underscore a focus on core inflation dynamics. The EUR/USD shows bearish tendencies but remains resistant to movement below the key support level, suggesting a continuation of the broader downtrend.

As we head into the final weeks of 2025, the immediate focus is the US government shutdown vote. A resolution will release a backlog of economic data, likely causing a spike in volatility for the EUR/USD pair. Traders should anticipate sharp moves as the market digests months of delayed information all at once.

Federal Reserve and EUR/USD Outlook

The Federal Reserve is sending conflicting signals, creating significant uncertainty around its December meeting. While officials like Bostic talk tough on inflation, the market is pricing a 60% chance of a rate cut, fueled by weakening labor data. Job cuts announced in October 2025 are the highest for that month in two decades, a stark contrast to the stronger labor market we saw back in 2023 and 2024 when the unemployment rate was consistently below 4%.

Meanwhile, the European Central Bank appears to be on a different path, which could favor the Euro. German inflation is hovering near 2.3%, and ECB officials are still concerned about sticky services inflation, suggesting they are in no rush to cut rates. Looking back, we can see that core inflation in the Eurozone was over 4% in late 2023, so while progress has been made, the ECB’s cautious stance is understandable.

Given the immediate uncertainty surrounding the US data release, traders could consider options strategies that profit from a large price swing, regardless of direction. Buying a strangle or a straddle on EUR/USD with a short-term expiry could be a way to capitalize on the expected post-shutdown volatility. This allows a position to be taken on the coming turbulence without betting on whether the dollar will strengthen or weaken.

For the medium term, the divergence between a potentially cutting Fed and a holding ECB presents a clearer directional theme. If we believe the US labor market weakness will force the Fed’s hand in December, buying EUR/USD call options with January 2026 expiry dates could be a viable strategy. This provides a way to position for a potential rise in the Euro with a clearly defined and limited risk.

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