EUR: Led by sterling

EUR/USD is currently being dragged around by UK asset markets and the pound. Reports yesterday that ECB staffers felt that the ECB terminal rate could be somewhere near 2.25% versus the nearly 3% priced by the market had little effect on EUR/USD. Instead, EUR/USD sits comfortably in a bearish channel that has guided it lower all year – running at roughly -5% per quarter! The top of that channel is now around parity and should be the extent of any unforeseen short squeeze here. There is not much eurozone data today but an expected August trade deficit of €45bn is a far cry from the €20bn+ surpluses run in early 2021 and is a reminder that the euro no longer has the backing of a large current account surplus. 0.9850/70 may be the extent of any intra-day EUR/USD correction.

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