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ECB meeting: door open to disappointment? – Rabobank

FXStreet (Edinburgh) - Jane Foley, Senior Currency Strategist at Rabobank, sees the likeliness of EUR-bears to get disappointed in today’s ECB meeting.

Key Quotes

“We do not expect any new policy measures to be released today and this implies that there is risk that the market could be disappointed after today’s policy meeting”.

“In our view the chances of the ECB announcing full blown QE before the end of this year stand at a little under 50%”.

“In order to compensate for a lack of new policy incentives today, we expect that Draghi will talk a dovish line”.

“The ECB is also likely to put a positive spin on its first TLTRO following the disappointing take up for last month’s offering. More detail regarding the ECB’s ABS and covered bond purchases scheme may also be on offer today”.

“Irrespective of the ECB’s preferences, EUR/USD has edged higher this morning. It is likely that the risk of a disappointing ECB policy meeting has triggered a round of profit-taking on short EUR positions”.

“We do not expect the Fed to hike interest rates until the end of 2015, several months after the market consensus. This view implies there is scope for pullback in the USD in the months ahead. While we expect diverging interest rate differentials will push EUR/USD lower towards 1.22 on a 12 mth view, the move could be a fairly volatile one”.

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