The euro (EUR) is weak, down slightly 0.1% against the US dollar (USD) as it underperforms all G10 currencies except the pound and the Swiss franc and fades a small portion of Tuesday’s gains, Scotiabank’s chief FX strategists Sean Osborne and Eric Theoret said.
The European Central Bank’s dovish bias limits the euro’s rise
“The shift in the options market has been notable and quite disconnected from fundamentals as yield spreads between Germany and the US remain weak. ECB comments have tended to be somewhat neutral/dovish, largely in response to recent EU-US tensions.”
“President Lagarde noted that policy was well placed while Nagel, a member of the House of Commons, spoke of growth concerns starting to outweigh risks from inflation. The short-term interest rate market is leaning towards marginal cuts and has added a few basis points over the past week or so.”
“The Euro appears to be consolidating Tuesday’s impressive rally and recent price action points to near-term resistance above 1.1750. The RSI is bullish and we remain focused on the late December high around 1.18, as well as the mid-September high around 1.1920. We look for a near-term range between support at 1.1680 and resistance at 1.1780.”
