EUR/USD continues to trade in a 1.1225-1.1385 channel since late-November. Upside momentum over the past few days has been limited and economists at Scotiabank expect the world’s most popular currency pair to drift lower towards the 1.10 level.

ECB is unlikely to increase rates before late-2023

“We think it’s more likely that the Fed hikes by 100bps this year (markets are at 75bps) than the ECB hikes by 10bps – with OIS markets penciling a first ECB increase in October. The 50bps in rate increases that markets are seeing by end-2023 would be a sharp turnaround from the ultra-dovish ECB.” 

“As markets adjust expectations around the Fed and the ECB, EUR/USD losses toward 1.10 should resume.”

“Support is ~1.1270/85 followed by 1.1260 and 1/1235/40.” 

“Key resistance is the 50-day MA at 1.1351 and the recent high of 1.1386.”

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