Scotiabank strategists Shaun Osborne and Eric Theoret report that the Euro (EUR) is trading slightly higher against the US Dollar (USD), with a fractional 0.1% gain as it aligns with most G10 currencies in relatively quiet market conditions [1]. The primary driver behind this modest appreciation is a market repricing of the European Central Bank (ECB) outlook, which has shifted toward renewed hawkishness. This shift is further supported by a resurgence in geopolitically-driven oil price gains and recovering yield spreads [1].
Markets are now pricing in approximately 35 basis points of ECB tightening by December, marking a considerable increase over the past week. This repricing has lifted fair value estimates for EUR/USD toward the mid to upper 1.14s, despite only modest recent gains in the currency pair [1]. Technical indicators show the Relative Strength Index (RSI) is recovering toward neutral, climbing into the mid-40s but still below the 50 threshold, indicating that momentum remains subdued [1].
Scotiabank analysts describe the current EUR trend as bearish to neutral, noting that while the recent modest recovery is significant, it has not materially shifted market momentum. They see limited near-term resistance ahead of 1.15 and expect the EUR/USD to remain range-bound between 1.1380 and 1.1480 in the near term [1].
CONCLUSION
The Euro's slight appreciation is attributed to a hawkish repricing of the ECB outlook and recovering yield spreads, with markets now expecting 35 basis points of tightening by December. Despite these supportive factors, analysts anticipate the EUR/USD will remain range-bound in the near term, with limited momentum for a stronger move.