The ECB announced it will be cutting bond-buying to 30 billion per month from January to September 2018, but did not close the door on further purchases beyond that date. The euro reacted with a downfall. What’s next?
Here is their view, courtesy of eFXnews:
EUR/USD: ECB Cleared The Policy Path For Most Of 2018 – SEB
SEB FX Strategy Research comments on today’s ECB policy decision:
“Today’s QE decision clears the ECB policy outlook for most of 2018. It was explained by ECB President Draghi as a signal of increasing confidence in the economic outlook.
The chosen policy path was effective in avoiding a taper tantrum. A very gradual winddown of QE makes sense in the context of the prevailing lowflation environment, with no significant acceleration of wage growth to be expected anytime soon. It also buys a bit more time (enough?) for France and Italy, in particular, to get structural reforms under way,” SEB argues.
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EUR/USD: Post-ECB & Ahead Of Next Week’s FOMC: Key Levels To Watch – Danske
Danske Bank FX Strategy Research discusses EUR/USD outlook after today’s ECB meeting and ahead of next week’s FOMC meeting.
“Overall, the dovish tapering message from the ECB today cements our sense that EUR/USD is range bound (1.19-1.16) on a 1-3M horizon with risks tilted a tad to the downside near term.
Notably, if Trump goes with Taylor as Fed chair, this opens for a move below the 1.1700 mark; we still see good support at the 1.1670 level (6 Oct low) though.
In the coming days, we would expect EUR/USD to settle around the 1.1750 level with the risk of next week’s FOMC meeting fuelling a move towards 1.1700 as focus returns to Fed’s determinedness to ‘normalise’.
On the upside, we think resistance at 1.1910 (2-Aug high) will hold, but in order to revisit the 1.20s we would likely need to see better prospects of eurozone core inflation edging higher on a sustained basis (a mid-2018 story) and/or markets to speculate (again) that the ECB is running into toolbox constraints,” Danske argues.
EUR/USD: Post ECB: Balance Of Risks Point To Further Downside Momentum – ANZ
ANZ FX Strategy Research discusses EUR/USD outlook after today’s ECB meeting.
“Although not a policy tool, the ECB’s upper tolerance level for EUR/USD may not be much more than 1.20. The ECB is of the view that the improved economic outlook is still contingent on ECB support and implicitly loose financial conditions.
In the very short term, the euro is testing the downside, given the dovish undertone to ECB policy. But there are some interesting events that could add momentum to the move. These include the near-term path of US inflation, which is expected to gradually recovery towards 2%…in contrast to the anticipated near-term path of euro area headline inflation,” ANZ argues.
“The unfolding landscape, therefore, suggest some potential for downside risks to EUR/USD near term,” ANZ concludes.
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