EUR: Testing 1.0700 Support Ahead of ECB Meeting

EUR: Trying to survive above 1.0700 into the ECB

Our economics team has published its latest preview of next week’s European Central Bank meeting. It's a close call, but we think policymakers will deliver one last 25bp rate hike. As things stand now, markets disagree with this view, pricing in a mere 9bp for September and 15bp to the peak. This means that there will be room for a sizeable rebound in the euro if we are right about the ECB.

We had warned EUR/USD would likely be vulnerable into the ECB meeting, and we are indeed seeing more USD strength keeping the pair pressured. It would already be a positive sign for EUR/USD bulls to see the 1.0700 support hold for another session, possibly indicating that could be the bottom into next week’s risk events.

The eurozone calendar includes the final read of the second quarter GDP, as well as a number of ECB speakers, who however should refrain from discussing monetary policy given the quiet period before the ECB meeting kicked off today.