Euro Slips Below Mid-1.13s as ECB Expectations Soften

The Euro (EUR) is experiencing pressure due to softer expectations surrounding the European Central Bank (ECB) policy decisions. Scotiabank strategists Shaun Osborne and Eric Theoret note that EUR/USD has drifted towards the mid-1.13s, a level not seen since May 2025. This softening in ECB rate expectations is causing yield spreads to weaken, indicating a loss of fundamental support.

The broader US Dollar (USD) tone remains dominant, but markets are starting to fade some of the tightening priced in beyond the next meeting. Near-term fundamental risk is limited ahead of Friday's preliminary CPI release, which may provide further insight into ECB expectations.

From a technical standpoint, EUR/USD short-term charts are bearish, with the Relative Strength Index (RSI) firmly in bearish territory. Limited support exists before the low-1.13s, and a break could lead to levels last seen in May 2025, threatening a retracement of the broader rally from parity.