Scotiabank’s FX team notes EUR/USD is drifting toward 1.15 after a Fed‑driven rally, with euro area CPI broadly in line with expectations and French data briefly lifting the Euro. Rate expectations are stabilizing, with about 42 bps of tightening priced by December. Their fair‑value estimate sits in the mid‑1.15s, with a near‑term 1.1450–1.1550 range.

Euro consolidates Fed‑driven gains

"The EUR is soft, down 0.2% vs. the USD with a drift toward 1.15 and a slight fade of this week’s rally. The preliminary euro area’s CPI release for July has offered little in terms of movement for spot, with headline coming in as expected at 2.9% y/y and core printing 2.5% y/y (vs. 2.4% exp.)."

"The French CPI data, released earlier, offered a modest lift to the EUR as the figures came in well above expectations. However the impact was short-lived as broader themes took hold. Comments from the ECB have been limited and the speaking calendar is empty over the next week or so."

"Rate expectations are showing signs of stabilization following their recent pullback and the market is currently pricing about 22bpts of tightening for September with a cumulative 42bpts of tightening by December. 2Y spreads (Germany-US) remain well supported and our narrow FV estimate is in the mid-1.15s."

"Bullish – the RSI remains bullish in the upper 50s and has seen an impressive reversal from the oversold (sub-30) bullish levels reached in late June. The 50 day MA (1.1482) has been broken and the daily chart offers little in terms of resistance ahead of 1.16. We look to a near-term range bound between support at 1.1450 and resistance at 1.1550. "

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