EUR up marginally as ECB inflation expectations climb – Scotiabank

Euro (EUR) is entering Wednesday’s NA session with a marginal 0.1% gain vs. the US Dollar (USD), a mid-performer among the G10 in generally quiet trade, Scotiabank's Chief FX Strategist Shaun Osborne notes, Scotiabank's Chief FX Strategist Shaun Osborne notes.

Complicating current bias to cuts

"The currency remains range bound and releases have been limited to the ECB’s inflation expectations data. The 1Y inflation expectations measure climbed for a second month, to 3.1%, reaching its highest level since February 2024."

" This presents a complicating development for the ECB as policymakers seek to determine the outlook for rates, in the context of their current dovishness and bias to further near-term cuts."

"Chief Economist Lane has spoken to the ECB’s key rate not being cut below 1.5%, roughly 100bpts below its current level. Markets are currently pricing nearly one full 25bpt cut for the June meeting and 67bpts of easing by December."

"The trend from February is bullish, despite the flat range that looks to have developed between the April high (1.1573) and the local May 12 low (1.1065). Momentum indicators remain bullish and we look to near-term support around 1.1280 and resistance above 1.1400."