EUR/USD falls to near 1.1550 as US government shutdown nears resolution

• EUR/USD edges lower following the news that the US government shutdown is nearing an end.
• Bloomberg reported centrist Senate Democrats backed a deal to reopen the government and fund key departments for the next year.
• The Euro may find support from diverging policy outlooks between the ECB and the Federal Reserve.

EUR/USD depreciates after three days of losses, trading around 1.1550 during the Asian hours on Monday. The pair loses ground as the US Dollar (USD) receives support after Bloomberg reported the record-breaking US government shutdown is nearing an end. A group of centrist Senate Democrats agreed to support a deal to reopen the government and fund some departments and agencies for the next year.

The agreement would ensure federal employees receive back pay and allow states to resume delayed federal transfers. It would fund some departments through January 30, while others would receive full-year allocations.

US Treasury Secretary Scott Bessent said on Monday that the US federal shutdown impact getting worse for the economy. Making substantial progress on inflation and expecting prices to come down over the coming months, Bessent added.

The US Dollar weakened after consumer sentiment fell to a three-and-a-half-year low amid growing concerns over the government shutdown. The University of Michigan reported on Friday that its Consumer Sentiment Index dropped to 50.3 in November, the lowest since June 2022, down from 53.6 in October and below expectations of 53.2.

The EUR/USD pair may regain its ground as the Euro (EUR) could receive support from the diverging policy outlooks between the European Central Bank (ECB) and the US Federal Reserve (Fed). The ECB is expected to keep rates unchanged for some time, with money markets now pricing only a 45% chance of a rate cut by September 2026, down sharply from over 80% in October.

European Central Bank (ECB) policymaker Francois Villeroy de Galhau emphasized the need to keep policy options open, while Governing Council member Joachim Nagel called for vigilance on inflation. Meanwhile, Vice President Luis de Guindos said any drop in inflation below 2% would likely be temporary.