EUR/USD: Near-to-medium term risks are tilted higher towards a push to 1.15/1.16.

Economists at Scotiabank expect the EUR/USD pair to advance nicely over the coming monthsEUR underpinned by spreads, technicals.

Resilient underlying inflation will drive a little more ECB tightening in the coming months and only a slow relaxation in rates thereafter. This should drive some additional narrowing in Eurozone-US spreads which will be essential for achieving our 2024 target but additional EUR gains cannot be excluded in the next few months as bearish sentiment on the USD builds.

EUR sentiment and positioning remain elevated but not necessarily extreme.Improved risk appetite will be supportive for diversification although US investors have already shown a healthy appetite for Eurozone stocks in recent months. Technical factors remain positive, something we noted in our last update, and indicate near-to-medium-term risks are tilted higher still towards a push to 1.15/1.16.

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