The EUR/USD currency pair is posting modest gains, a movement primarily attributable to the broad-based weakness in the U.S. Dollar following the Fed’s dovish pivot.
As U.S. rate expectations decline, the interest rate differential narrows, making the Euro relatively more attractive. Further supporting the single currency are recent data points showing a degree of resilience in the Eurozone, specifically stronger purchasing managers’ indices (PMIs) from the services sector, which suggests that the European economy is maintaining stability even as the European Central Bank holds rates steady.
Traders are betting on the continuing divergence between the two central banks—easing from the Fed versus a hold from the ECB—which should provide a structural tailwind for the Euro. The pair is eyeing the next key resistance at 1.1700 as the U.S. Dollar Index (DXY) remains under pressure.
