EUR: lower inflation increases likelihood of further ECB easing – BTMU

FXStreet (Guatemala) – Analysts at Bank of Tokyo Mitsubishi explained that the euro has weakened modestly driven both by the tentative improvement in the global investor risk sentiment and building expectations of further monetary easing from the ECB.

Key Quotes:

“The release of the weaker than expected inflation report from the euro-zone revealed that the annual rate of headline inflation fell back into negative territory declining by 0.2 percentage point to -0.1% in September.”

“However, it was reassuring that the annual rate of core inflation remained stable at 0.9%. The ECB has signalled clearly that it has moved closer to easing policy further and is sensitive to downside risks to inflation in the near-term. S&P announced yesterday the most aggressive forecast yet for further ECB stimulus expecting it to extend QE beyond September 2016 and most likely until mid-2018 which could result in total purchases of EUR2.4 trillion which is more than double the original commitment of around EUR1.1 trillion.

It appears unlikely that the ECB will announce such aggressive easing in the near-term, although S&P’s forecast highlights that the euro still remains subject to downside risks ahead.”

Analysts at Bank of Tokyo Mitsubishi explained that the euro has weakened modestly driven both by the tentative improvement in the global investor risk sentiment and building expectations of further monetary easing from the ECB.

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