Spot has drifted close to a cent from Monday’s peak around the 1.10 point, Scotiabank’s FX strategist Shaun Osborne notes.

Firmer support for the EUR is at 1.0850/60

“Although yesterday’s spot price action was driven by broader market volatility than fundamental developments, a 1.10 handle for the EUR does look fundamentally justifiable, considering the improvement in short-term yield differentials in the EUR’s favour in recent weeks.”

“Spreads are still onerous at -160bps at the 2Y sector of the curve but that compares to levels near –200bps in April. EUR/USD fair value sits just under 1.11 (1.1094), according to our estimate today.”

“Intraday price action looks a little soft for the EUR as the market corrects from yesterday’s intraday peak. Corrective losses may extend below 1.09 but firmer support for the EUR should emerge on dips to 1.0850/60. Resistance is 1.1075.”