Markets were further prepared for more policy easing from
ECB last week. ECB's President Mario Draghi emphasized his "whatever it
takes" commitment again, that it has necessary measures to reach back to
the inflation target and start with strong inflation anticipations.
EUR/USD is likely to relatively depreciate towards December,
as ECB meeting comes closer, any higher side would be seen as a chance to
restart post meeting EUR/USD short positions.
"We continue to expect an extension of the current QE
program and a 10bp deposit rate cut to -30bp. Yet, with EONIA forwards pricing
more than a 10bp cut in December we see a risk for EUR/USD to squeeze higher
should the ECB disappoint", anticipates Barclays.
An unwinding of recent rebound in inflation expectations
would be unlikely by ECB and it is also unlikely to squeeze EUR higher, this
might tighten the financial conditions through the interest rates and FX
channels.
Source: Net Dania
