EUR/USD capped? Watching Fed and Brexit concerns - Scotiabank

Analysts at Scotiabank noted that EUR/USD spot is little changed over the weekend.

Key Quotes:

"Lower US yields are undercutting the USD’s rate advantage versus the EUR (2Y bond spread lower at 125bps, the lowest in a month), providing the EUR with a little protection against the drag of the weak pound."

"The EUR may struggle to improve significantly, however, and we still think the downside is the weaker side of this market.

Firstly, UK concerns could easily spill over into the EUR – we would be surprised if they did not. Secondly, while the Fed is expected to remain on hold, the markets may react to implicit messaging from the Fed (statement, dot plot) which indicates higher rates are still likely this year."