EUR soft into ECB – Scotiabank

The Euro (EUR) is soft and trading defensively into Thursday’s ECB policy decision, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

Focus on tone, forecast, and implications for rates

"A hold is widely anticipated and risk lies in the press conference, President Lagarde’s tone, and communication around the ECB’s forecast – its first update since the conclusion of US/EU trade negotiations."

"We see the near-term balance of risk as being tilted to the upside for EUR, given that markets are still pricing in some modest easing over the next 12 months, and given that recent growth (PMI) and CPI data have revealed a considerable amount of resilience in euro are economic activity and inflation. In politics, France’s newly appointed PM Lecornu is in the early stages of discussions with major political groups as he looks to build a cabinet."

"The latest fade in EUR has pulled the RSI back toward a neutral momentum reading of 50. The 50 day MA (1.1686) remains an important trend level offering ongoing congestion, and we note that its slope appears to have flattened out. We look to a near-term range bound between 1.1650 and 1.1750."