EUR: Trying to read the ZEW tea leaves

EUR/USD is still stuck in its familiar holding pattern after finding support just under 1.15 last week. The 21-day moving average continues to act as an overhead barrier. Although plenty of traders see the 1.1470 area as a likely floor, the pair lacks a clear reason to push any higher for the moment. A possible spark may come once the US government reopens, since that would release the missing economic figures including the September and October non farm payrolls. Those could help set a clearer path for the euro.

Within the eurozone, softer indicators still look livelier than the official output data. Surveys suggest that confidence is holding up even though production remains subdued. Whether the harder numbers catch up will depend on how much of this upbeat mood turns into real spending, investment and manufacturing. Third quarter GDP is expected to be confirmed at 0.2 percent quarter on quarter, and the German ZEW survey is also forecast to improve again. Since ZEW expectations have tended to move in step with the euro by reflecting the outlook for Germany, a stronger reading could support the currency even if other data lag.

Even so, risks remain. Political tension in France and a worsening terms of trade picture have brought a more dovish tone back into the discussion around the euro. ECB officials continue to highlight international headwinds, and although markets are not pricing further cuts, that lack of easing potential also restricts the euro’s ability to gain from better figures.

For now, EUR/USD needs to stay above 1.1515 to 1.1530 in order to keep the bullish case alive. Without a fresh driver, the pair may drift quietly for a while, although the broader outlook still tilts gently in favour of the euro as we head toward 2026.

GBP: Sterling softens after labour market disappointment

The latest UK labour market release arrived this morning. Average weekly earnings came in at 4.8 percent in the three months to September compared with the 5 percent expected and down from the previous month’s 5 percent. Excluding bonuses, wages matched forecasts. Unemployment edged up to 5 percent, which was slightly above the estimate of 4.9 percent. The stand out figure, however, was the fall of 32 thousand in payrolled employees during October along with a similar downward revision for September. This undermines the idea that the labour market, while cooling, was beginning to find some stability.

Taken together, the data reinforce the dovish tone that the Bank of England hinted at last week when it asked for clearer evidence before supporting a possible cut in December.

On the technical side, the 21-day moving average slipped below the 200-day on Friday, completing a run of increasingly bearish crossovers. The short term picture has therefore begun to weigh on the longer term trend, with recent weakness now filtering through the wider structure.

As traders respond to the softer figures and adjust December easing expectations, we look for further pressure on sterling as the Asian session hands over to London. GBP/USD is targeting 1.3100, with a break likely if today’s softness continues. For GBP/EUR, the key support sits near 1.1340.

Attention next turns to Thursday’s preliminary third quarter GDP reading, the monthly GDP figures and the industrial and manufacturing production data.

USD: Dollar waiting for the data to return

The forty one day US government shutdown is expected to conclude this week after the Senate backed a temporary funding measure supported by a group of centrist Democrats. The package still requires approval from the Republican controlled House, although it is widely expected to pass soon.

The dollar index has continued to move sideways, holding to a one month floor at the 21-day moving average. Shorter term support around 99.500 has remained solid, providing a first layer of defence and showing that buyers are still stepping in.

Expectations that the shutdown might finally end have been most visible in equity markets, where the S and P closed 1.5 percent higher. Risk leaning currencies such as AUD and NZD have also performed well. The dollar is unlikely to match these gains since it still reflects investor concerns about US political uncertainty.

Even so, the dollar has shown a slightly firmer relationship with risk taking this year, with a positive link to daily S and P 500 moves. An improvement in sentiment once the government reopens could therefore give the greenback some modest support. The real driver will come from the return of official data releases, which will reveal the current state of the US economy and help markets decide whether a December rate cut is truly unlikely.

For today, markets will focus on the NFIB small business optimism survey, which is expected to show a mild decline after September’s steeper fall that ended the recovery from April’s low point.