EUR/USD Plummets to 10-Week Low Amid Fed-ECB Divide

The EUR/USD pair has fallen to a 10-week low, decreasing by around 2.4% over the past month. Despite stronger-than-expected Eurozone PMI data showing business activity grew at a faster pace in September, the euro is coming under increasing pressure amid a growing Fed-ECB divide.

The service sector PMI rose to 53.0, up from 51.6 in August and ahead of expectations of 51.7, while manufacturing PMI remained unchanged at 52.7, in line with forecasts. The composite PMI, considered a good gauge of overall business activity, rose to 53.1, defying expectations of a decline to 51.5 and hitting a 41-month high.

The Fed-ECB divergence remains a clear driver for EUR/USD. The Fed is gearing up for additional hikes, while the ECB has less room to manoeuvre. The market is now pricing in a 53% probability of another Fed rate hike at the October meeting.