The euro surrendered early Friday gains against the dollar as robust US PMI data reinforced hawkish Federal Reserve expectations and bolstered the greenback near recent highs. EUR/USD reversed course following the stronger-than-anticipated manufacturing and services activity readings from the United States, which dampened hopes for aggressive Fed rate cuts in the near term. Escalating Middle East tensions added further safe-haven support to the dollar, pressuring the common currency lower.
The pullback marks a significant shift in intraday sentiment as traders reassess the monetary policy divergence between the Fed and European Central Bank. The dollar index remains elevated as markets price in a more cautious Fed easing cycle, while geopolitical risk continues driving flows into US assets. Currency volatility is expected to persist as economic data and Middle East developments evolve.
FXnCO Insight
Traders should monitor upcoming Fed commentary closely and reduce euro long exposure while geopolitical risk premiums favor dollar strength and US economic resilience challenges dovish rate cut expectations.
Source: FXStreet