The euro declined in European trading on Thursday against a basket of global currencies, marking its first drop in four sessions against the US dollar and pulling back from a seven-week high as traders moved to take profits and initiate corrective positioning.

Fresh data from the euro area showed an expansion in business activity in November, signaling accelerating growth in the fourth quarter. This improvement has strengthened market confidence in the regions ability to exit its period of economic weakness and may pave the way for a more hawkish stance from the European Central Bank in upcoming meetings.

Price Overview

EUR/USD fell by 0.152% to 1.1653, down from todays opening level of 1.1671, after hitting an intraday high of 1.1674.

The euro ended Wednesdays session up 0.4% against the dollar, its third straight daily gain, and touched a seven-week high at 1.1678 following strong European data and weaker US figures.

Business Activity Expands

Data released on Wednesday showed eurozone business activity growing at its fastest pace in two and a half years in November, as strength in the services sector offset relative softness in manufacturing.

Analyst Commentary

Steve Englander, head of global G10 FX research at Standard Chartered in New York, said the market is beginning to take note of the steady stream of stronger European data.

Englander added that optimism surrounding a potential end to the Russia-Ukraine war is supporting gains in several European currencies, particularly the euro and the British pound.

Christine Lagarde

During a session before the European Parliaments Economic and Monetary Affairs Committee, ECB President Christine Lagarde said on Wednesday that the eurozone economy is showing signs of recovery. Household spending is rising and the labor market remains resilient, providing support for economic activity despite ongoing challenges.

Lagarde noted that underlying inflation indicators remain aligned with the ECBs medium-term target of 2%, and she expects inflation to stay near that level in the coming months.

European Interest Rates

Data released this week showed an unexpected rise in headline inflation in the eurozone during November, highlighting persistent price pressures facing the ECB.

Following the inflation report, market pricing for a 25-basis-point ECB rate cut in December fell sharply from 25% to just 5%.

Sources told Reuters that the ECB is likely to keep rates unchanged at its December meeting.

Investors are now awaiting further economic data from the eurozone ahead of the 1718 December policy meeting, which will be key in recalibrating rate expectations.