EUR steady in upper 1.04s – Scotiabank

The EUR is flat on the session, Scotiabank's Chief FX Strategist Shaun Osborne notes. 

Narrower spreads are supportive

"Narrower spreads are providing some backing for the EUR as investors focus on the potential for European spending to ramp up amid pressure to lift defense outlays. Short-term EZ/US spreads have narrowed to around –200bps, about 25bps narrower since the start of the month." 

"Slimmer spreads plus solid European stock market returns (versus US markets) suggest there is some moderate upside potential in the EUR in the short run towards 1.06 (fair value is estimated at 1.0626 today)." 

"The EUR’s failure to push on through 1.0530 resistance keeps the near-term focus on range trading around the 1.05 area. Support is 1.0430 and—firmer—at 1.0385. A break above 1.0530 targets 1.0650/1.0750."