Scotiabank analysts Shaun Osborne and Eric Theoret note the Euro is slightly weaker versus the Dollar, drifting toward the lower end of its recent range. Yield spreads remain supportive and the broader EUR/USD trend is still seen as bullish. However, analysts stay cautious below 1.20 and look for a near-term 1.1800–1.1900 trading range ahead of key PMI releases.

Euro eases as ZEW disappoints

"Germany’s ZEW sentiment figures were softer than expected, offering a disappointing outlook for industrial production in Germany (ZEW historically leads industrial production by about 12-18 months)."

"Interest rate differentials remain supportive however, with yield spreads pulling back up toward their recent multi-year highs."

"In terms of drivers, the EUR’s tight correlation to its 3M risk reversal suggests that sentiment remains dominant."

"The broader trend is bullish however we remain cautious below 1.20. We look to a near-term range of 1.1800/1.1900."

"The data calendar remains critical into Friday’s preliminary PMIs, with a heavy speaking schedule for the ECB.

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