EUR/USD pushing lower in quiet trade - getting ready for tomorrow
Ahead of the ECB tomorrow, it seems the market is reassessing the risk of what was previously expected to be a surprise move. Since the start of the year, we have gone from a stable policy to a potentially larger than expected policy easing, which in recent weeks has been walked back by certain members over the governing council.
It is now widely acknowledged that the level of weakness in the Eurozone economy has taken officials by surprise, though with global trade uncertainty adding to a broader downturn in economic conditions, this has had an added negative impact on the exporting region, with Germany feeling the pressure.
However, German policymakers are the more opposed to easing more than the markets are anticipating, so at the very least, we can assume that tomorrow's decision is and will not be a foregone conclusion and this uncertainty in itself has seen the lead EUR/USD rate moving up and down in relatively tight ranges.
After testing the upper 1.1000's last week, the lead spot rate has been pretty well offered in the 1.1060-70 area, and this side of the announcement tomorrow, there is little chance that this will be challenged again. Instead, EUR/USD seems to be gravitating towards the 1.1000 level again, though we do not expect a strong test through here in the very near term
EUR/GBP is also following the USD rate closely, with support below the 0.8900 level expected to limit the downside as Brexit uncertainty should help contain any overextension on the downside here.