Scotiabank’s FX strategists report that EUR/USD is softer as regional inflation data point to downside risks for national CPI, even as ECB President Lagarde signals that more tightening could come. Swaps price modest additional tightening by September. Technically, they describe EUR/USD as neutral to bullish, with resistance at 1.1450, support at 1.1300/25, and a break above 1.15 needed to generate more positive Euro momentum.

Euro needs break above 1.15

"ECB President Lagarde said the Iran war had generated “significant” inflationary pressure and that it was not correct to describe the June move as an “insurance” hike– implying more tightening could come."

"Regional state inflation data released earlier this morning reflected decelerating inflation over the June year, however, suggesting a downside risk to the preliminary June national CPI data at 8.00ET."

"The market consensus had expected prices to remain flat on the month and steady at 2.6% over the year. Swaps are broadly steady, pricing in around 15-16bps of tightening risk by September."

"Neutral/bullish—Spot gains are struggling to extend through 1.1450 resistance, keeping trends flattish."

"Support remains 1.1300/25. Gains through 1.15 are needed to give the EUR more positive momentum."

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