EUR flat vs. USD following swift recovery of trade-related losses – Scotiabank

Euro (EUR) is entering Thursday’s NA session nearly flat against the US Dollar (USD), having recovered from sizeable Asian session losses driven by headlines related to trade, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Markets are pricing at least one more 25bpt cut by year end

"Sentiment appears to be dominating as we note EUR/USD’s tight relationship to risk reversals (options prices) and its ongoing break with yield spreads, reflecting a near-term misalignment with fundamentals."

"The euro area release calendar has been sparse this week, leaving the focus squarely centered on market developments and headline risk. Next Thursday’s ECB meeting appears to be fully priced for a 25bpt cut, as market participants and policymakers continue to debate the extent of additional easing. Markets are still pricing at least one additional 25bpt cut by year end."

"The multi-month trend is bullish, with a clear sequence of higher highs and higher lows since early February. Support was most recently observed around the 50 day MA (then 1.1075, currently 1.1184), and near-term resistance is expected above 1.1400."