Dollar Surges Against Euro Amid Hawkish PMIs
The US Federal Reserve's hawkish stance and strong Purchasing Managers' Indices (PMIs) have sent shockwaves through currency markets, with the dollar strengthening against the euro.
Danske Bank's research team notes that the release of hot US PMIs has weighed on EUR/USD, pushing it below 1.14. The composite PMI rose sharply to 58.4 in September, beating expectations and driving expectations for another Fed rate hike in October.
The services sector is a key driver of this strength, with input prices rising at the fastest pace since November 2022. This points to price pressures that could be hard to explain by energy costs alone.
In the euro area, the composite PMI also surprised to the upside, rising to 53.1 in September, its highest level in over three years. The ECB may need to consider further rate hikes, with growth and inflation pointing in the same direction.