Euro Rises as Diverging Central Bank Policies Lift the Single Currency

The euro edged higher on Monday, climbing to its strongest level in two weeks against the U.S. dollar and closing the session with a 0.1% gain. The rise came as the dollar softened, giving the single currency room to advance.

Additional support for the euro came from hawkish remarks by a European Central Bank Governing Council member, who noted that interest rates in the eurozone are currently “well-positioned.” His comments reinforced expectations that the ECB has effectively paused its rate-cut cycle, while the U.S. Federal Reserve is still widely expected to continue easing policy.

This policy divergence has strengthened the euro, as investors respond to contrasting monetary paths between the two major central banks.

Economic data also played a role. The eurozone’s November manufacturing PMI was revised down by 0.1 points to 49.6, marking the fastest pace of contraction in five months. Despite the slowdown, expectations suggest that eurozone interest rates are likely to remain stable for now.

Market pricing indicates only a slim 2% chance of a 25-basis-point ECB rate cut at its upcoming December 18 meeting—further reducing pressure on the euro.

Supported by a weaker dollar and clear contrast in central bank direction, the euro continues to gain ground in currency markets.