EUR/USD Hits 10-Week Low Amid Fed-ECB Divide

The EUR/USD currency pair has hit a 10-week low due to the strengthening US dollar, despite stronger-than-expected Eurozone PMI data. The service sector PMI rose to 53.0 in September, up from 51.6 in August and ahead of expectations.

However, even solid economic data is failing to support the euro amid a growing divide between the Federal Reserve (Fed) and the European Central Bank (ECB). The Fed hiked interest rates by 25 basis points last week and signaled further rate hikes before the end of the year, offering further support to the greenback.

The ECB faces a difficult balancing act of keeping inflation under control while avoiding unnecessary pressure on the fragile economy. ECB Vice President Vogt noted that persistent energy costs could eventually weaken consumption and economic growth, contrasting with the more hawkish stance heard from Fed officials this week.