EUR quiet around pre-ECB levels as markets reassess outlook for cuts – Scotiabank

Euro (EUR) is soft, down a marginal 0.2% vs. the US Dollar (USD) and trading around levels that had prevailed ahead of Thursday’s ECB meeting, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Markets are pricing about 30bpts of easing by December

"The widely anticipated 25bpt cut was delivered along with muddled guidance, as President Lagarde sought to retain optionality in an environment of elevated, trade-related economic uncertainty. The heavy communication that has since followed has leaned toward further easing while acknowledging the possibility that rates might already be at their terminal level for this cycle."

"Rate expectations are fading a portion of Thursday’s push higher but remain off of their recent lows. Markets are currently pricing about 30bpts of easing by December, offering the EUR some possible yield support if policymakers ultimately decide to shift to neutral."

"The trend is bullish, with a clear sequence of higher lows and higher highs. The RSI is confirming and at 57 is well short of the overbought threshold, leaving ample scope for further gains. The 50 day MA (1.1259) is an important medium-term support level. In the near-term, we look to support around 1.1380 and resistance above 1.1480."