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EUR: ECB easing speculations bolstered by dipping inflation – MUFG

FXStreet (Delhi) – Lee Halpenny, Currency Strategist at MUFG, notes that the speculations about further easing from the ECB has been strengthened by the falling inflation in the Eurozone as the euro has weakened modestly driven both by the tentative improvement in the global investor risk sentiment.

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.”

Bearish print added to the EUR/SEK chart

Bearish print added to the EUR/SEK chart
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