Euro Falls Nearly 2% as Strong US Data and Oil Prices Weigh On Value

The Euro has taken another hit as strong US macroeconomic data and higher oil prices continue to weigh on its value. The EUR/USD exchange rate has fallen nearly 2% in just two weeks, trading around 1.1385 at the time of writing.

The latest Purchasing Managers' Index (PMI) report from the US showed business activity growing at its strongest pace in over five years, with jobs and wages rising fast and input prices surging due to higher energy costs.

This has raised concerns that the US economy may be overheating, providing additional reasons for the Federal Reserve (Fed) to tighten its monetary policy further in coming months. Fed Governor Michael Barr confirmed this view on Wednesday, stating that 'further rate hikes are likely needed to ensure timely return to the 2% inflation.'

The surge in US Treasury yields has also supported the US Dollar, with the yield for the benchmark 10-year note crossing above the critical 5% level to reach its highest levels in 19 years at 5.135%. Oil prices have appreciated about 5% from Tuesday's lows, trading at $98.50 and adding pressure on the Eurozone's economic growth and inflation.