Euro Slumps Amid Strong US Data and Soaring Oil Prices

The Euro has taken a beating this week, plummeting nearly 2% in just under two weeks to trade around 1.1380 against the US Dollar. This decline is attributed to a perfect storm of strong US macroeconomic data and higher oil prices.

A robust Purchasing Managers' Index (PMI) report released on Wednesday showed business activity growing at its strongest pace in over five years, with jobs and wages rising rapidly and input prices surging due to higher energy costs. This has raised concerns that the US economy may be overheating, prompting further interest rate hikes from the Federal Reserve (Fed).

Fed Governor Michael Barr reinforced this view, stating that 'further rate hikes are likely needed to ensure timely return to the 2% inflation target.'

In addition to the PMI report, a five-year US Treasury auction met poor demand on Wednesday, causing yields to surge to long-term highs. The yield for the benchmark 10-year note crossed above the critical 5% level to reach its highest levels in 19 years at 5.135%, providing further support for the US Dollar.