Why the euro is struggling against the dollar

The dollar held near a six-week high as the euro came under pressure. However, gains in the inflation-sensitive services sector pared losses.

After strong business activity in the UK, the pound went up the most in five weeks against the euro.

The euro has been losing value against the dollar over the past two weeks. This is due to strong US jobs data and signs of steady inflation. Many thought that the US would raise interest rates more than expected.

S&P Global’s Index for the eurozone, seen as a good indicator of overall economic health, rose to a nine-month high.

An index of services sector activity rose to its highest level since June, while manufacturing contracted sharply this month.

Wage inflation tends to be higher in the services sector, and strong activity there suggests the European Central Bank will raise interest rates more – thereby supporting the euro.

On the last day, the euro fell by 0.32% against the dollar and amounted to 1.064 USD. In February, it lost nearly 2.3% of its value against the US dollar. But this is something special. It rose 1.6% against the Japanese yen and was flat against the pound.

Currencies

The dollar index is up nearly 2.3% in February, potentially putting it on track for its strongest monthly performance since a 3.21% gain in September. It is trading around 104, below Friday’s six-week high of 104.68.

German investor sentiment rebounded more than expected this month thanks to expectations of higher earnings in the energy and export-related sectors.

On Tuesday, US manufacturing data will be released. Meanwhile, the Fed’s preferred measure of inflation, Friday’s core personal consumption expenditure index, could give more insight into next year’s interest rates.

Against the yen, the dollar rose by 0.4% and reached 134.73.

Meanwhile, the sterling reversed course and rose 0.5% to $1.2099 against the dollar. It rose nearly 0.92% against the euro to 88.06 pence, its biggest one-day gain since mid-January, after data showed U.K. business activity was much healthier than expected in early February.