The US dollar soared to March highs after news from Europe

On Tuesday, the dollar experienced an increase in value following the release of unfavorable data from Europe.

The service sector of the Eurozone experienced a decline in business activity to its lowest point in 2.5 years.

The dollar index climbed to its most elevated levels in nearly 6 months, reaching 104.9.

On Tuesday, the dollar rose due to worries about the global economy, causing the euro to drop to its lowest point in three months, almost reaching $1.07.

The FxPro analyst team stated that the composite PMI for the euro region indicated a contraction in business activity at the quickest rate since November 2020, despite lower gas prices and full storage capacity. This was due to the high interest rates and reduced demand from China.

Bloomberg reports that investors are displaying increased optimism regarding the dollar due to the weak economic growth in China and Europe.

Recent evidence indicates that the US economy is still strong despite the implementation of stringent monetary policies. On the other hand, the sluggish economic growth in Europe has led to speculation that the European Central Bank (ECB) may have to reduce interest rates.

Monex Europe stated that two of the dollar's advantages - higher yields in the US and weaker economic growth in other countries - are still having an impact.

Goldman Sachs has decreased their estimation of the likelihood of a US recession from 20% to 15%. Simultaneously, they believe that the US economy's growth could lead to a further strengthening of the dollar.

The likelihood of a Fed rate increase at its November gathering increased to 42% from 33.5% the day before. Conversely, the market does not anticipate a rate hike by the Fed on September 20, with the probability at 92%.

FxPro believes that the EUR/USD pair falling below the 200-day average last Friday is a significant indication of a shift in the long-term trend, and could potentially cause the euro to drop to the $1.05 area.