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Euro Stabilizing as ECB Stance and Yield Spreads Support Currency
Developing
In Short: Scotiabank strategists say EUR/USD is stabilizing due to a hawkish ECB stance and improving Germany-US 2-year yield spreads, despite little surprise from euro area inflation data.
Scotiabank strategists Shaun Osborne and Eric Theoret report that EUR/USD is stabilizing after the Federal Reserve's decision, supported by improving Germany-US 2-year yield spreads and a hawkish European Central Bank (ECB) stance.
The pair is finding support in the mid-1.14s, near 1.1400, with resistance limited to 1.1550. Euro area inflation offered little surprise, with headline inflation remaining in the low 3% area and core inflation hovering in the mid-2% range.
According to FXStreet, the outlook for relative central bank policies remains supportive of EUR strength, with yield spreads moving in favor of the euro, particularly with a notable 7 basis point jump in the 2-year Germany-US yield spread.
What's still developing
- The US Dollar pauses following the post-Fed rally to seven-week highs, while a more hawkish repricing of the BoJ's policy normalization path supports the Japanese Yen.
Sources
- FXStreetlink