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Is the ECB QE priced in or not priced in? That remains an open question in markets, also after the shocking SNB decision to remove the EUR/CHF peg.

The team at BTMU explain their positioning, taking the SNB move into consideration, and offer a bearish bias:

Here is their view, courtesy of eFXnews:

The following is EUR/USD range and outlook for next week as provided by Bank of Tokyo-Mitsubishi UFJ (BTMU).

EUR/USD – BEARISH BIAS – (1.1450-1.1950).  

We are maintaining a bearish bias for the week ahead (but a much wider range due to the ECB) as we see a greater chance of the euro remaining heavy into the ECB monetary policy meeting on 22nd January.

We have argued in the second topic above that dollar buying momentum may be easing and the EUR/USD rate as being the most prone for a correction higher. But given the week ahead is nearly all the run up to the meeting, the bias is still bearish – however, the risks are beginning to change we feel and we’d anticipate turning bullish next week if the ECB’s monetary policy announcement is close to market expectations.

One aspect that might weigh on the euro into the meeting is the prospect of a larger than expected QE program. The SNB statement this week contained the view that monetary policy divergences would “become even more pronounced” suggesting perhaps the SNB might know more than we do.

SNB President declined to comment on collaborations with other central banks in regard to today’s decision which will no doubt fuel further the idea of a large QE program being announced.

Furthermore, while it is hard to envisage the FOMC raising rates in this type of market, the data has remained very positive on the whole. While the December retail sales report was weaker than expected it doesn’t change the story of strong consumption growth in Q4.

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