ECB VP Guindos remarked that despite evidence that the disinflationary process in the Eurozone was ‘well on track’, there were substantial risks around the outlook for prices, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR holds tight range in low 1.08s

“The comments are perhaps a further indication that ECB officials are not keen to ease policy as aggressively as market participants expect at this point.”

“Swaps continue to price in some 35bps of easing risk for December’s policy decision which looks a little rich on the basis of the past week’ more cautious messaging from officials. November Gfk Consumer Confidence improved to a slightly better than forecast –18.3 in November.”

“EUR/USD continues to consolidate. The recent pattern of trade does not preclude more losses but the EUR remains deeply oversold and the risk of a short-squeeze should not be underestimated. Note the daily RSI signal is edging marginally higher, reversing from over-extended levels. This is a potentially positive signal.”