As OCBC currency strategists Frances Cheung and Christopher Wong note, the euro (EUR) recouped losses from the start of the week and ended the week unchanged.

Factors may support the growth of the EUR exchange rate

“The ECB’s lack of dovishness and broad-based USD weakness are among the factors behind the EUR’s late comeback this week. A day later, she told reporters that the ECB was open to considering a rate cut in October if the economy suffered a major setback, although the next comprehensive set of information would not be available until its next meeting (which would be in December). Banque de France’s Villeroy added that the pace had to be highly pragmatic, with policymakers not committing to any specific path on interest rates in advance and retaining full optionality for future meetings.”

“Other ECB officials also weighed in: 1/ Simkus said policymakers would need strategic patience as they plot the way forward, with services inflation and wage dynamics being key uncertainties; 2/ Holzmann said there could be room for another 25bp cut at the December meeting; 3/ Kazaks said a cut could be considered if the economy turns out to be much weaker than currently expected and inflation also falls significantly; 4/ Rehn said eurozone growth remains sluggish and downside risks to growth have increased over the summer.”

“Overall, the focus is on growth. If growth momentum slows significantly, the rate cut cycle could gain momentum. However, there is no rush for now, with the ECB preferring to maintain full optionality. As such, the ECB’s lack of urgency to ease policy, given the Fed’s greater room to maneuver, could support EUR growth. The bearish momentum on the daily chart is showing signs of fading, while the RSI has risen. Risks are slightly tilted to the upside for now. Resistance here at 1.1140 and 1.12. Support at 1.1010, 1.0970 (50-DMA, 38.2% Fibonacci retracement of 2024 low to high).”