According to analysts at INF, the euro should largely look through this week’s European Central Bank meeting and risks for EUR/USD remains skewed to the downside.
Key Quotes:
“The January meeting of the European Central Bank should have a little impact on the euro. No new economic projections will be published and the board is unlikely to change its risk assessment. An official announcement that the bank is launching its strategic review has been well-flagged and is not likely to affect the euro materially either.”
“With euro rates deeply negative and little prospect of a turnaround in the near-term, the outlook for the euro remains unattractive and the currency is likely to continue to be used as the funding vehicle of choice for carry trades.”
“We continue to see EUR/USD risks as skewed to the downside in coming weeks (towards / modestly below the 1.10 level) should the use of the euro as a funding currency become even more pronounced or global economic data disappoint. Talk of a Republican tax cut 2.0 may also add to a downward EUR/USD trend.”
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