The ECB cut its policy rate 25bps Thursday, as expected, Scotiabank’s Chief FX Strategist Shaun Osborne notes.
EUR is trading softer following this week’s central bank policy moves
“Another cut in March is expected, at which point the ECB may drop its reference to policy being ‘restrictive’, suggesting policymakers feel rates are nearing neutral. Swaps anticipate further easing over the coming year to take the policy rate back to 2%. Eurozone/US short-term spreads have nudged a little wider since the FOMC Wednesday, leaving the 2Y spread at –207bps today and weighing on the EUR.”
“Spot is down for a fourth day in a row and trading below the 40-day MA (1.0393) which had provided some support for the EUR earlier in the week. More corrective losses for the EUR seem likely after spot’s top/reversal at 1.0535 at the start of the week. Support is 1.0360 and 1.0315.”
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