Euro gets leg up from USD debasement trade

Matthew Ryan, CFA Ebury

An encouraging pick-up in manufacturing sentiment buoyed the PMI composite index of business activity for August, confirming that the Eurozone economy maintains modest momentum into the third quarter of 2026.

As the fresh increases in energy prices start showing up in the CPI reports, we think the combination of decent activity and higher inflation has sealed the case for an ECB hike in September, and the market agrees.

Meanwhile, the Euro is benefiting from the new leg of the dollar debasement trade, as markets put the unsustainable US debt dynamics under an increasingly harsh spotlight.

Author

Matthew Ryan, CFA

Ebury

Matthew is Global Head of Market Strategy at FX specialist Ebury, where he has been part of the strategy team since 2014. He provides fundamental FX analysis for a wide range of G10 and emerging market currencies.

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