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Will the ECB send EUR/USD higher?

The euro is bracing itself for the big event of the week: the decision of the European Central Bank on Thursday. Will Draghi send the common currency higher?

Here is their view, courtesy of eFXnews:

EUR/USD: ECB To Sow The Seeds For EUR Next Leg Higher – SocGen

Societe Generale Cross Asset Strategy  Research discusses the EUR outlook going into next week’s ECB meeting.

“Next week sees the  likely announcement of an extension to the ECB’  QE programme until September at a reduced pace of €25bn per month. Over time, however, the disconnect between real Bund yields and the strength of the eurozone economy will probably act as a magnet dragging the euro higher in due course

This will sow the seeds of the euro’s next leg higher but isn’t likely to propel it out of its range just yet,” SocGen argues.

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Week Ahead: EUR/USD Risk / Reward Ahead Of ECB: ‘Not December 2016 All Over Again’

Credit Agricole CIB FX Strategy Research discusses the EUR outlook ahead of next week’s ECB October policy meeting in which The central bank is expected to announce its plans for the recalibration of its QE program.

“It is widely expected that any extension of the asset purchases should come at a slower monthly pace with market views seemingly divided between a six-month extension at a pace of EUR40bn and a nine-month extension at a pace of EUR30bn,” CACIB notes.

In terms of market impact, parallels with December 2016  – the last time around when the Governing Council extended its QE programme and sent EUR tumbling – seem inevitable. That said  we note the differences, which could help EUR regain ground after the ECB meeting.  

….All in all, with markets having cut some of their EUR longs but with Eurozone fundamentals and FX valuations still quite favorable,  we believe that the longer-term risks for the currency are still to the upside,” CACIB argues.

In line with this view,  CACIB sticks with its longs EUR/USD* and EUR/CHF* in its model FX portfolio.

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Yohay Elam

Yohay Elam

Yohay Elam: Founder, Writer and Editor I have been into forex trading for over 5 years, and I share the experience that I have and the knowledge that I've accumulated. After taking a short course about forex. Like many forex traders, I've earned a significant share of my knowledge the hard way. Macroeconomics, the impact of news on the ever-moving currency markets and trading psychology have always fascinated me. Before founding Forex Crunch, I've worked as a programmer in various hi-tech companies. I have a B. Sc. in Computer Science from Ben Gurion University. Given this background, forex software has a relatively bigger share in the posts.