Scotiabank strategists Shaun Osborne and Eric Theoret highlight that the Euro (EUR) is flat versus the US Dollar (USD), with EUR/USD stuck in a range as markets weigh conflict-related inflation risks and a hawkish European Central Bank (ECB) stance. Rate expectations imply nearly one 25 bp hike by June and over 75 bps by December. Technicals are neutral, anchored around the 200-day moving average.

Euro steady as markets eye ECB path

"The EUR is entering Tuesday’s NA session flat to the USD, a mid-performer in the context of mixed overall trade – a welcome departure from the risk-on/ off movement that has generally defined priced action over the past two months."

"There have been no fundamental releases, and comments from the ECB remain hawkish tying the duration of the conflict to the degree of tightening required to stem inflationary pressures."

"Rate expectations are steady, pricing just under one full 25bps hike for June and over 75bps by December."

"Yield spreads have pulled back into the middle of their range, and measures of sentiment also reveal a slight loss of support with a modest rebuild in the option market’s premium for protection against EUR downside."

"Neutral – recent price action has reverted back to a range following last week’s short-lived attempts above 1.1750. The RSI has returned to the neutral threshold at 50 and the 200 day MA (1.1677) remains an important level of closing support."

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