From analysts at the Royal Bank of Scotland:
EURUSD looks set to trade into a lower 1.00-1.10 range in 2017 after marking a 1.05-1.15 range for the last two years.
the European Central Bank is set to extend its €80bn a month of asset purchases when it meets on December 8 until the end of 2017. Chart 3 shows the ECB continues to face inflation well below its de facto 2% target. October’s headline CPI reached 0.5%y/y on the back of energy base effects and RBS expects it to rise as high as 1.6%y/y in 2017. But core inflation remains stuck at 0.8%y/y. October’s ECB minutes said ‘underlying inflation had still not shown clear signs of an upward trend’ and this week President Draghi said there was ‘no sign yet of consistent underlying price pressure’. RBS forecasts core inflation will only be 0.7% in 2017 and 0.9% in 2018, prompting the ECB to extend quantitative easing throughout next year.
