Chief Analyst at Danske Bank Allan von Mehren noted there is still scope for further downside in the pair.
“EUR/USD decline extended yesterday after the EU voiced the negative opinion on the Italian budget and euro PMIs disappointed, adding to the sense of a fragile macro environment in the euro zone amid mounting political risks”.
“The ECB meeting today is set to deliver little new policy signals and as such should not be expected to move the single currency much”.
“With USD strength still looming around every corner due to its carry lure (despite the minimal support to the greenback from the equity sell-off), EUR/USD could be in for a test of the autumn lows (1.1301, 15-Aug low) near term as the ECB is not ready to provide support for the euro just yet”.
“On this regard, we not that the Effective Fed Funds rate continues to inch higher and yesterday reached 2.20, which means it now equals the Interest On Excess Reserves. A small sign that USD is scarce in some corners of the market due to Federal Reserve QT”.