Euro: Support from ECB repricing and yields – Scotiabank

FXStreet Insights Team FXStreet

Scotiabank strategists Shaun Osborne and Eric Theoret notes the Euro (EUR) is slightly higher versus the US Dollar (USD), supported by a repricing of the European Central Bank (ECB) outlook toward renewed hawkishness and recovering yield spreads. They highlight markets now price about 35 bps of tightening by December, lifting fair value estimates for EUR/USD toward the mid to upper 1.14s despite only modest recent gains.

Euro aided by hawkish ECB repricing

"The EUR is entering Thursday’s NA session with a fractional 0.1% gain vs. the USD as it performs in line with most of the G10 currencies in quiet overall trade."

"The outlook for relative central bank policy is offering the EUR support as market participants reprice the ECB outlook in light of renewed hawkishness and a resurgence in geopolitically-driven oil price gains."

"Markets are currently pricing in about 35bpts of tightening by December, a considerable increase over the past week or so. Yield spreads are showing signs of recovery and lifting fair value estimates of the EUR toward the mid/upper-1.14s."

"Bearish/neutral—the EUR’s recent modest recovery is important, however the tepid gains have offered little in terms of shifting momentum in a more material way. The RSI is recovering back toward neutral but still remains below the 50 threshold as it climbs into the mid-40s."

"We see limited near-term resistance ahead of 1.15 and we look to a near-term range bound between 1.1380 and 1.1480."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

GBP/USD clings to gains near 1.3400

GBP/USD retreats after reaching a three-week high above 1.3430, challenging the 1.3400 yardstick on Thursday. Although easing political uncertainty in the UK helps the quid limit its downside, escalating tensions in the Middle East support the Greenback, keeping Cable under scrutiny.

EUR/USD faces resistance around 1.1450

EUR/USD keeps the bid bias although it seems to have met a tough hurdle around 1.1450 on Thursday. The pair’s advance follows the bearish tone in the US Dollar despite escalating tensions in the Middle East and a broad-based cautious stance from market participants.

Gold flirts with two-day highs, approaches $4,130

Gold stages a modest rebound on Thursday, setting aside a three-day losing streak and managing to surpass the $4,100 mark per troy ounce. However, steady geopolitical tensions have revived concerns over persistently high global inflation, reinforcing expectations of higher rates across the board and somewhat curtailing the yellow metal’s upside potential.

Bitcoin stalls as mixed ETF flows, renewed US-Iran tensions cap upside

Bitcoin trades at $63,000 on Thursday, recovering slightly after facing rejection near $64,000. Renewed geopolitical uncertainty has dampened risk appetite, limiting BTC upside potential.

Japan may be changing its Yen strategy, but markets don’t look scared

Japan may be changing its intervention playbook, but that might not be enough to rescue the battered Yen. With USD/JPY hovering at four-decade highs, the currency’s weakness is being driven less by speculative pressure and more by a powerful structural force: the wide US-Japan rate gap.

Bye, forward guidance: How to trade when central banks choose silence

Central banks have spent years telling markets what might come next. Now, traders face the possibility that they say a lot less. From the Federal Reserve to the European Central Bank and the Bank of England, policymakers are pushing back against forward guidance.