The euro drifted lower to $1.1593 on Monday as global investors positioned themselves ahead of upcoming European Central Bank (ECB) remarks and crucial U.S. economic releases expected to influence Federal Reserve policy direction.
The decline followed a previous uptick in the single currency, which had benefited from improved global risk appetite and a softer U.S. dollar, helping the euro gain traction through its usual inverse correlation with the greenback.
Since the beginning of 2025, the euro has appreciated roughly 12% against the U.S. dollar amid sustained weakness in the dollar index. However, fresh economic guidance has remained limited. Eurozone industrial production and labour market data have underperformed expectations, while producer prices continue to trend downward.
Moreover, the prolonged U.S. government shutdown has stalled the release of major economic reports, forcing traders to rely on market sentiment rather than formal data points.
ECB Vice President Luis de Guindos recently expressed optimism that inflation in the Eurozone would gradually converge toward the bank’s target. However, he warned that potential tariff actions, elevated public debt, and the risk of abrupt shifts in investor sentiment remain key concerns.
The EURUSD pair held above the $1.16 mark over the weekend but slipped earlier today as options worth roughly €485 million at the $1.16 strike move toward expiry. Analysts identify support around the $1.1575–$1.1585 range amid a week expected to be light on Eurozone data releases.
The ECB’s September outlook projects GDP growth at 1.2% in 2025 and 1.0% in 2026, while inflation is forecast at 2.1% this year and 1.7% next year.
Meanwhile, the U.S. Dollar Index (DXY) has weakened to nearly 99.00—its lowest level this month—and continues to hold below its 20-day moving average.
Investor sentiment in Germany unexpectedly deteriorated, and Eurozone industrial output underwhelmed. Nevertheless, expectations that the ECB will maintain current rate levels—while the Bank of England extends its rate-cut cycle—kept the euro largely supported during the past week.
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