The European Central Bank (ECB) policy decision came and went as expected—no change in rates and little in terms of forward guidance beyond reaffirming ‘data dependency’, Scotiabank’s chief FX strategist Shaun Osborne notes.

EUR sees support in the mid/upper 1.08s

“The usual post-meeting leaks around the tone of policy discussion indicated that ECB policymakers may see limited room for additional cuts and might only be able to reduce interest rates once more this year. Markets are still leaning towards the idea of two more cuts (45bps priced in for the remainder of 2024) but swaps and the Euro (EUR) will be sensitive to data that may make the hawks’ case for proceeding cautiously any stronger.”

“The EUR has lost a little ground on the session but should see support in the mid/upper 1.08s in the short run. Just when the EUR looked set to extend gains, a big setback on the daily chart yesterday suggests more range trading for spot.”

“Underlying dynamics for the EUR have weakened a little following losses Thursday and (so far) today but the broader bullish picture remains intact. That should mean that EUR losses will be corrective and might be relatively shallow before renewed gains. Look for support on dips to the low/mid 1.08s now.”