Euro Surges on Strong PMI Data Amid Broad USD Weakness

The EUR/USD pair has strengthened due to broad US Dollar (USD) weakness and unexpectedly strong Eurozone economic data. The Eurozone's August Purchasing Managers' Index (PMI) was higher than forecast, reaching a nine-month high at 52.1.

This solid expansion in manufacturing activity has left the policy rate near the top of the European Central Bank's estimated neutral range of 1.75%-3.00%. Swaps have almost fully priced in a 25 bps European Central Bank (ECB) hike to 2.50% at the next September 10 meeting and total tightening of 60bps over twelve months.