Fed–ECB Divergence & Shutdown Risks Mix Markets (09.30.2025)

The euro slipped below $1.1720 in late September, pressured by diverging monetary outlooks as the Fed is expected to deliver more rate cuts while the ECB holds steady. 

The Japanese yen softened near 148.7 per dollar amid uncertainty over the BoJ’s policy stance, while sterling firmed to $1.343 following fiscal pledges from UK Chancellor Rachel Reeves. In commodities, gold surged to a record $3,850 and silver hovered near $47, both strengthened by safe-haven demand as U.S. government shutdown risks intensified and investors priced in additional Fed easing.

EUR/USD Retreats as Fed and ECB Diverge

The euro slipped below $1.1720 in late September, erasing gains from its early 2021 peak and ending the month nearly unchanged as investors weighed policy signals against renewed trade tensions. Markets expect the Federal Reserve to deliver at least two more 25-basis-point cuts this year, while sentiment in Europe suggests the European Central Bank has likely concluded its easing phase after holding rates steady for a second straight meeting.

Technically, 1.1680 is the key support, while resistance is seen at 1.1760 and 1.1775.

Japanese Yen Softens Amid Policy Uncertainty

The Japanese yen weakened to around 148.7 per dollar on Tuesday, pausing a two-day rally as investors weighed mixed signals from the Bank of Japan. The September meeting’s Summary of Opinions showed some policymakers backing further rate hikes if growth and inflation stay on track, while others favored keeping rates low to protect the economy from U.S. tariff effects.

Resistance is at 150.20 while support holds at 147.80.

Record Gold Rally as Shutdown Worries

Gold surged to a record $3,870 per ounce on Tuesday, its strongest monthly gain in 14 years, as investors sought safety amid worries of the U.S. government shutdown risks and expectations of further Fed cuts. Talks between President Trump and congressional leaders on Monday failed to secure short-term funding, raising the likelihood of a shutdown when current funding expires at midnight Tuesday.

From a technical perspective, support is around 3800 and resistance is at 3875.

Pound Rises to $1.3430 After Reeves’ Fiscal Pledge

The British pound rose to $1.3430 after Chancellor Rachel Reeves addressed the Labour Party conference. She pledged to maintain fiscal rules, announced investment in the TransPennine Northern Powerhouse Rail, and highlighted Labour’s initiatives in education, the NHS, and industry, including a £1.5 billion loan guarantee for Jaguar Land Rover. Reeves also stressed anti-fraud efforts, citing the recovery of £400 million from Covid contract corruption.

Technically, support is at 1.3370, with a break lower exposing 1.3325. Resistance sits at 1.3495 and 1.3525.

Silver Holds Near $47 on Shutdown Risks

Silver hovered around $47 per ounce on Tuesday, set for nearly 15% gains in September as safe-haven demand grew amid the unresolved US government funding standoff. President Trump made little progress on a temporary deal, fueling uncertainty. Traders now price in a quarter-point Fed cut in October and about 42 bps of easing by year-end.

From a technical perspective, the resistance is seen at 47.80, while the support is at 45.95.