EUR/USD Surges Past 1.13 as ECB Turns Hawkish and Eurozone PMI Beats

Euro Breaks Out: EUR/USD Above 1.13 for First Time Since 2021

The euro surged past the 1.13 level against the US dollar this week, reaching its strongest point in three years. The move was driven by a combination of upbeat Eurozone economic data and a shift in the European Central Bank's rhetoric toward a more cautious approach to rate cuts.

ECB's Nagel Pushes Back on Aggressive Cut Bets

Bundesbank President Joachim Nagel — a known hawk on the ECB Governing Council — warned that markets were "getting ahead of themselves" in pricing ECB rate cuts. With Eurozone core inflation holding at 2.7%, Nagel argued the central bank should not rush toward neutral policy.

ECB President Christine Lagarde echoed the measured tone, noting that wage growth remains elevated and services inflation is proving "stickier than anticipated." Markets have now pushed back expectations for the next ECB cut from June to September.

Eurozone PMI Surprises to the Upside

The April Eurozone Composite PMI printed at 52.1, well above the 50.8 consensus and the third consecutive month of expansion. Germany's manufacturing sector showed signs of stabilization for the first time since mid-2022, while France's services sector accelerated.

The data undercut the narrative that Europe would slip into recession as US tariffs weighed on export-dependent economies.

Technical Picture: Resistance Now Support

From a technical standpoint, the 1.12–1.13 zone was significant resistance for years. The clean break above this level on strong volume suggests the move has momentum. Currency analysts at Barclays now target 1.16 as the next objective.

Implications for European Equities and Exporters

A stronger euro creates headwinds for European exporters — particularly German auto manufacturers and luxury goods companies with large US revenue exposure. The DAX slipped 0.8% on the week despite strong macro data, reflecting currency translation concerns.