Euro to US Dollar Forecast: EUR Rallies, USD Slides on Fresh Jobs Shock

Modified: Wednesday, 1 October 2025 22:15 BST - Written by Tim Boyer

STORY LINK Euro to US Dollar Forecast: EUR Rallies, USD Slides on Fresh Jobs Shock

The Euro to Dollar (EUR/USD) exchange rate posted gains on the US shutdown and following weaker than expected US jobs data. It failed to hold initial 1-week highs amid a retreat on the crosses, but traded above 1.1750 and close to 1-week highs.

Scotiabank commented; “We are somewhat heartened by the prior break of the descending trend line drawn from the descending July highs and see little in terms of resistance ahead of 1.18 and the mid-September high just above 1.19.”

ING is also positive on the outlook; “we think the US government shutdown and the softer dollar story should dominate today and could be enough to drag EUR/USD to 1.1800/1820.”

Most investment banks, including ING, Scotiabank and MUFG expect medium-term EUR/USD gains to 1.20.

ADP reported a decline of 32,000 in private-sector jobs for September compared with consensus forecasts of an increase close to 50,000 while the August data was revised to slow a decline on 3,000 compared with the original reading of a 54,000 increase.

Chief Economist Dr. Nela Richardson commented; “Despite the strong economic growth we saw in the second quarter, this month's release further validates what we've been seeing in the labor market, that U.S. employers have been cautious with hiring.”

Overnight, the US Senate failed to break the impasse on government funding and the government started to close down.

The shutdown comes at a particularly difficult time given uncertainty over the labour market and economy. The jobless claims data and employment report are liable to be postponed.

President Trump has also threatened to fire thousands of workers, adding to the uncertainty.

Scotiabank commented; “The shutdown may trigger government worker furloughs or layoffs and will halt the publication of key government data releases—such as Friday’s NFP report—which will compound investor concerns about the status of the US economy.”

MUFG sees scope for further vulnerability; “If Trump does follow through with firing workers and the shutdown becomes prolonged, the rates market will at least look to price a greater prospect of a rate cut in October and December, a scenario still not fully priced, which will likely weigh on dollar performance over the short-term.”

Following the data, markets were pricing in close to a 100% chance of a Fed rate cut at the October meeting and the chances of a further cut in December increased to near 90%.

The Euro-Zone inflation data met market expectations with the headline rate increasing to 2.2% from 2.0% with the core rate holding at 2.3%.

The data reinforced expectations that the ECB would hold rates steady in the short term.

According to Scotiabank, there is a green light for further Euro gains; “EUR fundamentals remain supportive as we note the renewed rise in Germany-US yield spreads, and sentiment is providing an added boost as the options market prices a greater premium for protection against EUR strength.”

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TAGS: Euro Dollar Forecasts