• The Euro retreats against the US Dollar as Congress moves closer to a deal to reopen the federal government.
• Diverging policy outlooks between the European Central Bank and the Federal Reserve continue to support the single currency.
• Investors await fresh Eurozone confidence data after the Sentix Index dropped in November.

EUR/USD trades around 1.1560 on Monday at the time of writing, virtually unchanged on the day. The US Dollar (USD) finds renewed support following Bloomberg reports that a group of centrist Senate Democrats agreed to back a deal to end the US government shutdown. The agreement would fund several departments through the end of the year and ensure that federal employees receive back pay.

This development eases fears of a prolonged hit to household confidence, which has been severely affected in recent weeks. The University of Michigan’s Consumer Sentiment Index, released last week, fell to 50.3 in November, the lowest since mid-2022.

On the monetary policy front, the divergence between the European Central Bank (ECB) and the Federal Reserve (Fed) remains a potential source of support for the Euro (EUR). ECB Vice President Luis de Guindos reiterated on Monday that the current level of interest rates is “appropriate,” noting that inflation is approaching the 2% target. Meanwhile, other policymakers such as François Villeroy de Galhau and Joachim Nagel called for prudence while remaining vigilant about inflationary pressures.

At the same time, the US Senate advanced a budget bill to extend federal funding, a key step before final approval by the House of Representatives and signature by the President. If enacted in the coming days, the end of the shutdown could bolster market sentiment, although Commerzbank analysts noted that “many uncertainties still lie ahead” for the US Dollar’s trajectory.

Looking ahead, investors will focus on the release of the German and Eurozone ZEW Economic Sentiment Index, due on Tuesday. The survey is expected to provide further insight into how investors perceive the region’s economic outlook amid persistent uncertainty over global demand and monetary policy. After the recent drop in the Sentix Investor Confidence Index to -7.4 in November, markets will closely watch whether the ZEW figures confirm a similar deterioration in sentiment or point to signs of stabilization across the Eurozone.