ECB Hawkishness Supports Euro Amid Strong PMI Data

The European Central Bank's (ECB) hawkish stance on interest rates has provided a floor for the euro, limiting its downside potential.

Despite a slowing economy, the ECB has maintained a firm tone on interest rates, signaling that further tightening remains on the table to combat inflation.

This hawkish rhetoric contrasts with expectations of rate cuts from the Federal Reserve, creating a policy divergence that supports the EUR/USD exchange rate.

The market is currently pricing in a higher terminal rate for the eurozone than previously anticipated, which provides structural support for the currency.