Euro Eyes Mid-1.17s as Yield Spreads Narrow

The Euro (EUR) has been experiencing a firming trend for four weeks in a row, according to Scotiabank strategists Shaun Osborne and Eric Theoret. This bullish momentum is driven by economic resilience in the Eurozone, despite challenges from energy and drought conditions, as well as narrowing yield spreads versus the US.

The 2-year yield spread between the Eurozone and the US has narrowed to -136bps this morning, its smallest advantage since May. This trend suggests that investors are becoming increasingly optimistic about the Euro's prospects.

Osborne and Theoret believe that a push through the 1.1625/50 range could open up further gains for the EUR/USD exchange rate, potentially reaching the mid-1.17s. However, they note that support at 1.1550/75 remains a key level to watch.