USD: Shutdown ends, data game on
Yesterday’s big news was, of course, the end of the shutdown, with President Donald Trump signing legislation to conclude the longest government shutdown in US history (43 days). That said, it may still take some time for government operations to return to normal, so the data flow could remain delayed. Also, the interim spending package funds most of the government only through January 30, raising the prospect of another shutdown battle at that time. Meanwhile, Democrats’ sought‑after healthcare demands – extending Obamacare subsidies – had to be set aside. So while markets can breathe a sigh of relief for now, the setup still raises doubts about the durability of the seemingly agreed peace.
The dollar index – the DXY – has remained range‑bound, trading between the 200‑day moving average and the 21‑day moving average, with the gap slowly converging – a sign that more bullish short‑term momentum may be beginning to challenge the bearish cloud that has hung over the dollar in 2025.
With official government data now back on the agenda, the DXY now looks set to break either north or south of that range, which has only started to take shape toward the end of October and into November. Until then, consolidation around the 99 handle is expected to hold, with a floor near 99.250.
GBP: No political shelter for sterling
EUR/GBP has breached 0.88 faster than anticipated, reaching its highest levels in almost three years. Political drama in the UK found fresh ground yesterday. What began with a misguided briefing evolved into explicit acknowledgment of a potential leadership challenge against Prime Minister Keir Starmer, followed by new claims of active plotting allegedly involving Health Secretary Wes Streeting in efforts to dislodge the leader. Streeting dismissed the allegations, calling them “self‑destructive behavior” from anonymous sources.
While replacing a sitting Labour prime minister remains a tall order, the discord has sharpened focus on the government’s ability to address the UK’s economic and financial challenges, with the Autumn Budget looming. The story may have certainly taken on an overly dramatized, almost gossip‑like character, yet it underscores how fiscal pressures are being refracted through a fractured political backdrop. Risk premium has found new fuel, dragging sterling lower – a move unlikely to fade at least before the 26 November budget.
Adding to the political noise, this morning, UK GDP expanded just 0.1% in the three months to September (vs. 0.2% expected), while monthly GDP for September contracted by 0.1%.
Following the past few days’ turmoil, roughly 15% of a quarter‑point cut had remained unpriced – more a reflection of political risk premium weighing on the long end of the curve – but today’s confirmation of weaker growth may cement easing expectations, leaving sterling exposed on both fundamental and sentiment fronts.
EUR/GBP has extended its upside trajectory, with near‑term targets now at 0.8870–0.8900. Support levels remain in view around 0.8770, followed by the 21‑day moving average at 0.8700.
EUR: Lacking momentum, will the data deliver?
EUR/USD continues to struggle near its 21-day moving average, just below $1.16. Rebounds in recent weeks have repeatedly stalled at this level, pointing to subdued euro demand. In such a range-bound phase, both rallies and pullbacks are likely to remain contained. The end of the US government shutdown may soon unlock key data releases, offering a potential catalyst for renewed directional momentum.
Looking further ahead, growth differentials are likely to remain key drivers of G10 FX in 2026. Unless the expected growth gap between the euro area and the US narrows, the bullish EUR/USD case from 2025 may struggle to gain momentum.
In Europe, fiscal stimulus could support GDP next year, though ongoing political uncertainty in France poses a risk. The US economy, meanwhile, has weathered tariff uncertainty better than expected – helped by AI-driven investment, strong equity markets, and a loose policy mix. The eurozone–US economic surprise index differential has turned positive again, signalling a relative improvement in European data flow. However, the shift remains modest, and further upside surprises from the euro area and more importantly – downside surprises in US data – will likely be needed to sustain euro gains.
Unusually, the Fed is easing later than the ECB. With eurozone rates likely at their trough around 2%. The Fed is expected to cut three times through next year according to current market pricing though. If such policy paths unfold, they support a yield-driven bullish view on EUR/USD, but growth outcomes will need to confirm that narrative.
Positioning adds another layer of complexity. Leveraged funds remain modestly underweight euros, while asset managers’ long positions are stretched – at highs not seen since mid-2023, according to CFTC data (pending updates due to the shutdown). This reflects the bullish structural and cyclical view that gained traction after April 2, but also signals limited room for further upside without a fresh catalyst. Overall, stretched positioning and lingering uncertainty suggest EUR/USD may struggle to extend gains unless growth and policy expectations align more clearly.
Sterling crosses extend losses
Table: Currency trends, trading ranges and technical indicators
Key global risk events
Calendar: November 10-14
All times are in GMT
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
