Scotiabank strategists Shaun Osborne and Eric Theoret highlight the Euro (EUR) trading quietly against the US Dollar (USD) in a tight low-1.14 range, with limited reaction to stronger ZEW sentiment data. Short-term rates have stabilized after a hawkish repricing, supporting EUR via yield spreads. Markets expect little change from the July European Central Bank (ECB) meeting, focusing instead on September tightening and watching resistance near 1.1500.

Euro holds tight pre-ECB decision

"The EUR remains quiet as it continues to consolidate within a remarkably tight range in the low-1.14s, entering Tuesday’s NA session with a fractional 0.1% gain vs. the USD."

"Broader developments appear to be offering little in terms of movement for the EUR, and we note the absence of any material reaction to the release of stronger than expected ZEW investor sentiment data – a leading indicator for German industrial production activity (by 12-18 months)."

"Short-term rates markets are showing signs of stabilization ahead of Thursday’s ECB decision, consolidating the recent hawkish repricing that has delivered fundamental support to the EUR via yield spreads."

"Markets are pricing little change for the July 23 decision, favoring September with 22bpts of tightening currently reflected in OIS with a cumulative 43bpts by December."

"Neutral – the EUR’s technicals are offering little in terms of momentum as the RSI shows signs of stabilization just below the neutral threshold at 50. Recent price action has been narrowly confined to a tight range roughly bound between 1.1380 and 1.1480, and we remain neutral absent a meaningful push toward 1.1500 and the 50 day MA at 1.1516."

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