Euro Weighed Down by Diesel Export Ban Concerns and Widening Spreads

Scotiabank strategists Shaun Osborne and Eric Theoret note that the Euro remains soft due to widening front-end spreads and concerns over a potential US diesel export ban, despite official denials.

The EU is worried about the impact of such a ban on European diesel supplies, with some countries heavily reliant on imports from the US. This has contributed to the EUR's decline against the US Dollar.

According to IFO readings, Germany's business climate index improved in September, rising to 89.9 and expectations increasing to 90.4. However, this improvement diverged from German GDP since 2024.

Osborne and Theoret see the EUR/USD as being in a bearish trend, with losses looking extended and support expected around 1.1325/50. They note that while sentiment data has diverged from German GDP, improved IFO readings better align with firmer growth trends in the economy.