EUR/USD rebounds above 1.1700 US Dollar strength fades amid shutdown, Fed cut bets

• EUR/USD climbs back above 1.1700 after dipping to a near two-week low as US Dollar rally fades.
• Greenback loses steam as fiscal gridlock and dovish Fed outlook weigh on sentiment.
• Traders eye speeches by ECB President Christine Lagarde and Kansas City Fed President Jeffrey Schmid later on Monday.

The Euro (EUR) recovers modestly against the US Dollar (USD) on Monday, paring earlier losses after briefly hitting its lowest level in nearly two weeks. The pair climbs back above 1.1700 as the Greenback's initial advance, driven by weakness in the Euro and the Japanese Yen (JPY), loses steam.

At the time of writing, EUR/USD is trading around 1.1709, bouncing off an intraday low of 1.1651. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, hovers near 98.10 after briefly surging to 98.50, its highest level since September 26.

The Euro came under heavy pressure earlier in the session as traders reacted to the abrupt resignation of French Prime Minister Sébastien Lecornu, who stepped down on Monday just hours after unveiling his new cabinet. The political shock in Europe's second-largest economy initially weighed on the common currency, but investors later trimmed Euro shorts as the Greenback's early rally unwinds.

The Greenback's early strength was also bolstered by renewed weakness in the Japanese Yen, following the recent change in Japan's leadership. However, the Buck struggled to sustain its gains as the prolonged US government shutdown and expectations of further interest rate cuts by the Federal Reserve (Fed) weighed on sentiment.

The US federal government remains shut for a sixth straight day, with no sign of an immediate resolution. The Senate is set to reconvene on Monday, with a key vote on a temporary funding bill expected later in the day.

The ongoing shutdown has delayed several key US economic releases, leaving traders to rely on private-sector data and comments from Federal Reserve officials for near-term guidance. The economic calendar is relatively light on both sides of the Atlantic this week, with the Fed's meeting minutes due on Wednesday and the ECB's Monetary Policy Meeting Accounts on Thursday.

Market participants also look ahead to remarks from ECB President Christine Lagarde and Kansas City Fed President Jeffrey Schmid, both scheduled to speak later on Monday.