Analysts at Bank of Tokyo Mitsubishi explained that the euro is likely to remain under modest downward pressure against the US dollar in the week ahead.
Key Quotes:
“The case for more aggressive ECB easing has been reinforced recently by both the euro-zone’s loss of growth momentum early this year and the return of inflation back into negative territory. Speculative short euro positioning is relatively light limiting the scope for a squeeze higher if the ECB disappoints.”
“We would expect the euro to weaken modestly if the ECB meets expectations for a lower deposit rate, increased monthly asset purchases and extended duration of QE. Any discussion/implementation of a tiered system which could allow the ECB to cut rates even deeper into negative territory could weigh more on the euro.”
“However, we believe that for downward pressure to increase on EUR/USD it will also likely require the US interest rate market to discount more tightening from the Fed. The US economic data has improved recently offering some support for a stronger US dollar although the market remains reluctant yet to shift from its current dovish outlook for Fed policy. Without another solid payrolls report, the US dollar could struggle to strengthen much further in the near-term.”
(Market News Provided by FXstreet)