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The euro's outlook remains constructive, supported by a firming economy.
A surprise 16-month high in the eurozone Composite PMI underpins the euro's constructive outlook.
The PMI rose to 51.2 in September, continuing the trend seen since the start of 2025, beating analyst expectations for a reading of 51.1.
According to S&P Global, compilers of the report, the acceleration in the pace of growth in business activity was due to the service sector posting the fastest rate of increase in 2025 so far.
The headlines will verify current market expectations that the European Central Bank (ECB) has completed its interest rate cutting cycle.
This will mean Eurozone short-term bond yields retain support, in turn bolstering demand for euros.
The euro to dollar exchange rate trades is in a multi-month uptrend, and trades at 1.1786 at the time of writing Tuesday. The euro to pound sterling exchange rate is also trending higher, trading at 0.8719, placing it near the top of the summer-2025 range.
"We forecast the pair to move slightly higher over time," says Patrick Ernst, FX Strategist at UBS Switzerland AG.
Underpinning confidence in the outlook was news that the under-pressure manufacturing production sector continued to recover, as it held near the near three-and-a-half year high registered in August.
S&P Global said Germany was a key driver of growth in September, recording a solid increase in output that was the joint-fastest since May 2023, equal with that seen in May 2024.
"Soft data have been improving lately, reflecting the anticipated fiscal boost in Germany," says Ernst.
However, the bloc's second-largest economy, France, continues to disappoint. Here, activity decrease for the thirteenth consecutive month, and at the sharpest pace since April.
The disappointment is consistent with chronic political uncertainty, which leaves businesses uncertain about the trajectory of the country's regulations, spending and taxes.
The rest of the Eurozone registered continued growth of output, but the rate of expansion moderated.
Looking ahead, new business was unchanged in September, following a first rise in 15 months during August.
However, export growth potential continues to disappoint with the business survey revealing new export orders have decreased in each month since March 2022, and the latest modest decline was the most pronounced in six months.
The ECB will be emboldened by the finding that employment was stable in September, thereby ending a six-month sequence of job creation. Staffing levels in the services sector continued to rise; however, manufacturing employment continued to fall.
In terms of the inflation pipeline, Germany posted a solid rise in charges, with the pace of inflation hitting a five-month high, while the rest of the Eurozone (ex-France) registered a solid increase in selling prices, but one that was the slowest since last November.
This will give the ECB 'hawks' reason to remain guarded on any attempts to lower interest rates.
As long as this is the case, euro exchange rates will find themselves supported across the board.