The EUR/USD pair is currently positioned at 1.1748, following significant fluctuations influenced by a combination of political developments in Washington and disappointing U.S. labor statistics. The U.S. government has officially entered a shutdown at midnight due to Congress’s inability to pass a funding bill. This situation has resulted in federal workers being furloughed and heightens the risk of delays in the release of economic data. The ongoing political paralysis exerted downward pressure on the dollar, enabling the euro to maintain its position above the 1.1710 support level, even with intraday fluctuations reaching 1.1720.
The ADP Employment Change report indicated a decline of 32,000 private-sector jobs in September, representing a significant shortfall compared to the anticipated increase of 50,000. This figure is also considerably worse than the August revision, which was adjusted from a gain of 54,000 to a loss of 3,000. The soft labor market print prompted a swift response in EUR/USD, causing the pair to surge from its low around 1.1720 back toward the 1.1750 level. The lackluster labor market fuels speculation that the Federal Reserve might need to expedite its easing cycle, which could further weaken the dollar.
In the Eurozone, the preliminary September Harmonized Index of Consumer Prices experienced a year-on-year increase of 2.2%. Meanwhile, Germany’s Consumer Price Index saw a rise to 2.4%, up from 2.2% in August. The Core HICP has maintained its position at 2.3%. The data indicates that inflation continues to be persistent in Europe, supporting the European Central Bank’s choice to maintain a restrictive policy stance for the time being. Despite the data, the euro did not achieve lasting momentum, indicating that investors are primarily concentrating on developments in the U.S.
Later in the session, focus will turn to the ISM Manufacturing PMI, anticipated to be 49 for September compared to 48.7 in August. A reading below 50 indicates contraction; however, any unexpected positive outcome could mitigate the dollar’s losses. Market participants are closely monitoring the impact of the shutdown and worsening labor conditions on business confidence, which could further entrench the U.S. economy in a soft patch as the fourth quarter commences.