The Euro (EUR) is soft, down a marginal 0.1% against US Dollar (USD) with a drift to fresh local lows at levels last seen early November, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

EUR is soft on narrowed rate differentials

"Interest rate differentials are narrowing modestly within their range, eroding some of the EUR’s fundamental support as markets soften their expectations for Fed easing. The outlook for the ECB remains neutral, reflecting the central bank’s communication."

"Short-term rates markets are pricing little in terms of policy changes through October 2026. Fundamental releases remain limited ahead of Friday’s preliminary PMI’s and broader developments are likely to continue to dominate."

"Wednesday’s meaningful pullback has dragged the EUR back toward its early November lows and the RSI back below 40, signaling modest bearish momentum. Support appears limited ahead of the November 5 low in the mid/upper 1.14s, and a break would shift the focus to the early August low around 1.14. We look to a near-term range bound between support around 1.1480 and resistance around 1.1580."