Euro Resilience Tests Market Expectations Amid Energy Price Spike

The Eurozone economy has shown remarkable resilience in the face of a significant increase in energy prices. Despite this challenge, experts expect the PMI indices of business activity to confirm this resilience when released this week.

The manufacturing subindex could surprise to the upside as German industry recovers from difficulties caused by low Rhine water levels and increased defense spending.

This recovery will likely lead to another interest rate hike at the ECB's December meeting, which should help return the euro to a gradual path higher against the US dollar in the medium-term.

However, in the near term, the common currency could face selling pressure due to rising oil prices and a sell-off in bond markets driving safe-haven flows into the US dollar.