The Euro (EUR) is trading defensively with a marginal 0.1% decline against the US Dollar (USD), softening back toward Wednesday’s lows around 1.16, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret note.

Bond market signals confidence in France’s political developments

"EUR weakness was observed on the back of weaker than expected trade figures from Germany, as August data offered a surprise contraction in exports. The weaker German trade data follow Wednesday’s disappointing industrial production print, suggesting a softening in the euro area’s economic outlook. Yield spreads are steady however, and comments from the ECB remain neutral."

"France’s political situation remains uncertain and President Macron has stated his intention to name a new Prime Minister by Friday evening. The France-Germany 10Y spread is narrowing and appears to be signaling confidence in President Macron’s ability to form a new cabinet ahead of the October 13 budget deadline."

"EUR/USD continues to trade defensively as it softens back toward Wednesday’s low around 1.16. The RSI is pushing below 40 and signaling modest bearish momentum. Support appears limited between 1.16 and the early August low under 1.14. We look to a near-term range bound between support at 1.16 and resistance at 1.1650."