The euro extended its rally against the US dollar this week, climbing 0.7% to 1.1220, driven by better-than-expected economic data from the Eurozone. The latest PMI readings showed robust expansion in the manufacturing and services sectors, signaling resilience despite ongoing geopolitical uncertainties. Germany, Europe’s largest economy, reported a surprising uptick in industrial output, further supporting the euro.

The European Central Bank’s firm stance on tackling inflation has also bolstered investor confidence. ECB President Christine Lagarde recently reiterated the bank’s commitment to raising interest rates to achieve price stability, contrasting with the Federal Reserve’s more cautious tone.

However, challenges remain. High energy costs and lingering supply chain disruptions continue to weigh on the region’s growth prospects. Analysts caution that the euro’s rally could face headwinds if these issues persist. For now, the single currency appears well-positioned to benefit from a more optimistic economic outlook in the Eurozone.