EUR/USD steadies as weak ADP data, US shutdown weigh on Greenback

• The Euro holds ground near 1.1750 as traders digest soft US ADP print.
• US government shutdown weighs on the Greenback, raising uncertainty over the release of Friday’s NFP report
• Focus shifts to upcoming US S&P Global and ISM Manufacturing PMI data later on Wednesday.

The Euro (EUR) steadies against the US Dollar (USD) on Wednesday, with EUR/USD reversing some of the earlier losses as traders react to softer-than-expected US private sector employment figures.

At the time of writing, the pair is trading around 1.1754 during the American session, extending gains for a fourth straight day and up roughly 0.18% on the day. Meanwhile, the US Dollar Index (DXY), which tracks the Greenback's value against a basket of six major currencies, is hovering around a one-week low near 97.61.

The Greenback remains broadly offered as investors weigh the economic fallout from the ongoing US government shutdown, which has already halted several federal operations and could delay the release of the key US economic data, including the Nonfarm Payrolls (NFP) report on Friday.

In the likely absence of NFP, investors have placed added emphasis on the ADP Employment Change as a proxy for labor-market momentum. The latest ADP figures came in sharply weaker than expected, showing that the US private sector shed 32,000 jobs in September, defying forecasts for a gain of about 50,000. Adding to the downbeat tone, August’s figure was sharply revised down to a loss of 3,000 jobs from an initially reported gain of 54,000.

The weak labor reading underscored concerns that the US labour market is losing steam and strengthened the case for additional Federal Reserve (Fed) interest rate cuts. According to the CME FedWatch Tool, markets are now pricing in a 96% probability of a 25-basis-point cut in October, while the probability of another cut in December has risen to 87% from about 78% before the release of the ADP report.

Looking ahead, traders will focus on the S&P Global final Manufacturing Purchasing Managers Index (PMI) and the ISM Manufacturing PMI due later on Wednesday, which could provide further clues on the state of US economic activity and influence expectations for the Fed’s moneatry policy path.