Euro: Rally stalls against US Dollar as spreads drive trade – Scotiabank
Scotiabank strategists Shaun Osborne and Eric Theoret report the Euro (EUR) is slightly softer versus the Dollar, with its late-July rally stalling as price action mirrors yield spreads.
Scotiabank analysts Shaun Osborne and Eric Theoret report the Euro (EUR) experiencing a slight decline against the US Dollar, as its late July rally comes to an end. This stall in the Euro's upward trend appears to be mirrored in the yield spread movement. Market sentiment still leans towards a hawkish European Central Bank (ECB) outlook, with expectations of around 24 basis points of tightening by the September 10th meeting and a total of 40 basis points by the end of the year.
Despite this, the Euro remains supported at mid-1.16 levels, with a risk premium priced in for its strength. The pair has stalled around the 1.1350-1.17 range since late July, struggling to extend gains beyond 1.1700. Current short-term support is noted in the mid-1.16 range, with a potential for further support near the 200-day moving average at 1.1633.
While the Euro's rally from late July seems to have plateaued, the sentiment remains constructive, reflecting a modest premium for EUR protection.
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