EUR flat vs. USD following modest improvement in PMI's - Scotiabank

The Euro (EUR) is entering Wednesday's NA session unchanged against the US Dollar (USD), quietly consolidating in a tight range just below 1.14, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Markets anticipate an ECB's cut on Thursday

"The final euro area PMI's offered a modest surprise vs. the preliminaries, with services printing 49.7 (from 48.9) and the composite pushing into expansion territory just above 50, printing 50.2 (from 49.5). The final German prints were marginally softer and French prints marginally higher, but all remained below 50 in contractionary territory."

"This week's releases have offered little to change expectations for Thursday's ECB policy decision, with markets fully pricing a widely anticipated 25bpt cut. Expectations for additional easing have softened somewhat however, offering some support to EUR/USD with a modest narrowing in deeply negative EU-US yield spreads. The risk for Thursday's ECB would be a neutral cut and a shift away from the easing bias that has dominated ECB communication over the past year or so."

"The multi-month trend remains bullish and EUR/USD's recent recovery to fresh one month highs has delivered an important retracement of the decline from early May. The pullback clearly defined the 50 day MA (1.1233) as an important level of near-term support. Momentum is moderately bullish with an RSI at 55 and the near-term range is defined by support below 1.1350 and resistance above 1.1450."