ECB Governor Makhlouf said he believed a ‘prudent and cautious’ approach to policy setting was appropriate which suggests he is not in favour of a bolder rate cut at the December policy decision, Scotiabank’s Chief FX Strategist Shaun Osborne notes.

EUR consolidates above key support

“There are a few more ECB speaks on tap today—including President Lagarde. Swaps are pricing in around 30bps of easing at the December 12th decision so some recalibration of rate cut expectations could give the EUR a little support in the short run but it is marginal and the broader USD trend remains strongly bullish. Scope for EUR rebounds is limited for now.”

“The EUR is little changed on the session and short-term trading patterns have slipped into a sideways consolidation range. Price action reflects better EUR selling pressure on minor gains, however. Broader trends are EUR-bearish and key support sits just below the market at 1.0448 (2023 low).”

“A further lurch lower in the EUR is likely to develop on a break under there. Resistance is 1.0600/50.”