Euro Recovery Against US Dollar Limited by French Spread Tensions: Scotiabank

EUR/USD is trading around 1.1212. Scotiabank strategists Shaun Osborne and Eric Theoret note that the Euro (EUR) trails its peers amid persistent tensions in Eurozone bond markets. France’s social and fiscal pressures continue to keep the French OAT/Bund spread elevated. Germany’s ZEW survey points to improved current conditions but weaker expectations. With the Eurozone economy still in a slow recovery phase, according to the bank, the scope for Euro (EUR) gains remains limited.

Euro Upside Limited by Bond Spreads

"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.)