Euro Steady Ahead of Expected ECB Hike

Markets are awaiting Thursday's European Central Bank (ECB) meeting, where a 25 basis point hike and a hawkish tone are widely anticipated. According to Scotiabank strategists Shaun Osborne and Eric Theoret, the Euro (EUR) is little changed near the low 1.16s.

Osborne and Theoret note that supportive yield spreads and a fair value estimate around 1.1650 are supporting the EUR against the US Dollar. Technical indicators also show a marginally bullish RSI and a medium-term uptrend, with limited resistance toward 1.1680-1.1700.

The outlook for relative central bank policy remains supportive, as yield spreads continue to recover. Germany's July trade data showed a larger-than-expected surplus, while France disappointed with a wider-than-expected deficit.