The Euro (EUR) is soft, down a fractional 0.1% vs. the US Dollar (USD) as it underperforms all of the G10 currencies with the exception of GBP and CHF and fades a minor portion of Tuesday’s gains, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

ECB dovish tilt caps Euro upside

"The shift in the options market has been notable and completely divorced from fundamentals as German-US yield spreads have remained soft. Comments from the ECB have leaned somewhat neutral/dovish, largely in response to the latest tensions between the EU and US."

"President Lagarde suggested that policy was in a good position while GC member Nagel spoke of growth concerns beginning to outweigh risks from inflation. The short term rates market is leaning toward marginal cuts and has added a few bpts over the past week or so."

"The EUR looks to be consolidating Tuesday’s impressive surge and recent price action is suggestive of near-term resistance above 1.1750. The RSI is bullish and we remain focused on the late December high around 1.18, as well as the mid-September high around 1.1920. We look to a near-term range bound between 1.1680 support and 1.1780 resistance."