Euro: Recovery capped by French spread tensions against US Dollar – Scotiabank

Scotiabank strategists Shaun Osborne and Eric Theoret highlight EUR/USD around 1.1212, noting the Euro (EUR) is underperforming peers as Eurozone bond-market tensions persist. The elevated French OAT/Bund spread reflects ongoing social and fiscal strains. While the German ZEW survey shows some improvement in current conditions, expectations softened, and the bank characterizes the Eurozone economy as remaining in a slow recovery phase, limiting Euro (EUR) upside.

Bond spreads restrain Euro performance

"The EUR is lagging its major currency peers on the day, weighed down by tensions in Eurozone government bond markets. The 10Y OAT/Bund spread remains elevate, near 150bps, reflecting social/fiscal tensions in France."

"Germany October ZEW Survey reflected a solid improvement in the (still soft) Current Situation reading (-35.9 versus -44.5 expected and -47.1 in September) but some softening in the Expectations component (to 28.1, from 33)."

"The survey of financial professionals tends to be heavily weighted by market, rather than economic, developments but generally indicates the economy remains in “slow recovery” mode. "

"Neutral – The EUR is little changed on the day. Sentiment and momentum are soft, preventing the EUR from taking advantage of the generally weaker USD tone and leveraging the bullish impulse that developed on the weekly chart last week – at least for now. Intraday support is 1.1175/80. Resistance is 1.1275. "

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)