The euro climbed above $1.17, its strongest level since May, supported by improving Eurozone economic data and a weaker US dollar. Business activity in the currency bloc continued to expand in August, with manufacturing showing a notable rebound, particularly in Germany, while growth in services remained more subdued. The euro also gained from dollar softness after the US Treasury announced an expansion of its bond buyback programme, a move that pulled long-term Treasury yields lower and put pressure on the greenback.
At the same time, Eurozone consumers slightly trimmed their inflation expectations, with projected price growth over the next year easing to 2.9% from 3% in June. Even so, inflation remains well above the ECB’s 2% target, sustaining expectations of further monetary tightening after June’s rate hike. Investors are also digesting recent turbulence in global bond markets, where worries about persistent inflation and elevated government spending have driven yields higher.
