EUR/USD: Remains comfortable around the 1.09 area – Scotiabank

Germany’s ZEW Survey for July reflected slightly weaker expectations among investors. The Euro (EUR) is trading around the 1.09 area, supported by the recent compression in short-term yield spreads, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR may extend its gains to the mid-1.09s

“Germany’s ZEW Survey for July reflected slightly weaker than expected expectations among investors (41) than markets expected (41.8). The index sat at 47.5 in June. This was the first decline in the index in a year. Investor concerns likely reflect the French election and the outlook for a relatively slow pace of ECB rate cuts moving forward.”

“The Eurozone’s May Trade surplus posted a lower-than-expected surplus of EUR12.3bn in May. The data showed a surplus of EUR14.3bn with the US and a 6.8% rise in exports to the States in the year. These trends may come under more scrutiny in the months ahead. The EUR remains comfortable around the 1.09 area for now, supported by the recent compression in short-term yield spreads.”

“Spot gains stalled above 1.09 yesterday but the EUR’s undertone remains constructive and bullish intraday, daily and weekly momentum readings suggest limited scope for losses for now and may drive gains to extend to the mid-1.09s. Look for spot to remain supported on minor dips through the upper 1.08s.”