EUR/USD: its all about the spreads - Scotiabank

Analysts at Scotiabank explained that the Eurozone industrial production rose 1.4% in the Aug month, more than double expectations, underscoring the renaissance in the industrial sector seen in recent months. 

Key Quotes:

"While US short-term rates eased fractionally in response to the FOMC minutes, spreads remain widely in favour of the USD, in theory, at the 2Y point of the curve.

Spot has become disconnected from short-term spreads since the middle of the year, however, as investors refocus on longer run differentials. 

Here, 10Y bond spreads have steadied somewhat after widening in the USD’s favour since mid-year but may still preclude the EUR from rallying significantly at this stage. "

"We think near-term trends rather hinge on 1.1850 or 1.1890 yielding – directionally, breaks either side of support/resistance should see additional follow through towards either the 1.18 area or the mid-1.19s"

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