Weekly Roundup: Euro pressured by dovish ECB rate hike 

The euro got off to a poor start last week. The publication of weaker-than-expected Eurozone PMI figures pulling EUR exchange rates lower as they reported the manufacturing sector suffered its worst contraction of growth in three years.

Adding to the euro’s woes on Tuesday was a larger-than-expected slump in German business morale.

The single currency managed to recoup some of its losses in mid-week trade as it was buoyed by its negative correlation with the US dollar.

However, EUR exchange rates then plummeted again on Thursday as the European Central Bank delivered its latest interest rate decision.

While the ECB raised rates to a 22-year high, it struck a notably dovish tone, with hints from ECB President Christine Lagarde that this might mark the end of its current tightening cycle.

The end of the week then saw the euro claw back some of its losses again as its negative correlation with the US dollar allowed it to shrug off a weaker-than-expected German GDP print.

So far this week, the euro is off to a good start, with stronger-than-expected Eurozone GDP and inflation figures buoying EUR sentiment.

Otherwise’ the euro’s trading relationship with the US dollar may continue to influence EUR sentiment. With the single currency potentially strengthening if weak US data triggers a USD selloff.