Scotiabank strategists Shaun Osborne and Eric Theoret highlight a softer Euro (EUR), with EUR/USD drifting toward the mid-1.13s and levels last seen in May 2025. The broader US Dollar (USD) tone dominates, while yield spreads show weakening support as markets fade post-September European Central Bank (ECB) hikes. Technicals are bearish, with limited support before the low-1.13s and expectations for a near-term 1.1300–1.1400 range.
"The EUR is soft, down a fractional 0.1% vs. the USD while drifting toward fresh one month lows in the mid-1.13s and threatening a break to levels last seen in May 2025."
"The broader tone remains dominant however yield spreads are also suggesting a loss of fundamental support on the back of a renewed softening in ECB rate expectations since last Thursday’s policy decision."
"Messaging from the ECB remains hawkish as policymakers guide for a hike in September however the market looks to be starting to fade some of the tightening that was priced in beyond the next meeting. Near-term fundamental risk is limited ahead of Friday’s preliminary CPI release."
"EUR/USD short-term technicals: Bearish—the latest downward drift has dragged the RSI firmly into bearish territory. We see limited support ahead of the low 1.13s and the late June low. A break would open up the risk of a push to levels last seen in May 2025, and threaten a retracement of the broader rally from parity. We look to a near-term range bound between 1.1300 and 1.1400."
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