EUR/USD: MARKET TILTING FIRMLY TOWARD ANOTHER 25 BPS HIKE IN JUNE WOULD STILL BE EUR-SUPPORTIVE

EUR/USD drifts but underlying support from narrower spreads remains intact, Shaun Osborne, Chief FX Strategist at Scotiabank, reports.

EUR should find firm support on dips

“Given elevated core inflation data, it seems likely to me that policy hawks will continue to push for rate hikes outside of more severe market turmoil. A 25 bps hike is more or less fully priced in for May 4th at this point. A half point move remains a long shot but a hawkish policy outlook – tilting market pricing more firmly towards another 25 bps hike in June would still be EUR-supportive.”

“A break under 1.0880 support would imply the risk of a short-term dip at least in the EUR back to the 1.08 area. Broader trends (and trend momentum) remain EUR-bullish, however, implying the EUR should find firm support on dips.”