Short EUR as ECB set to take another step towards further easing – BNP

By FXStreet FXStreet (Delhi) – Research Team at BNP Paribas, expect the ECB to deliver a dovish message but stop just short of announcing additional accommodation.

Key Quotes

“Although the arguments for easing are compelling, our economists believe President Draghi will opt to wait for updated staff forecasts in December to gather greater support among Governing Council members. That said, we do see a fairly high 40% chance of an immediate move, which would be via a EUR 10bn expansion to the APP.”

“Since the September press-conference was already quite dovish the question is whether the October meeting manages to move the needle further without actual easing. We think this could be done via a reference to a concrete discussion of policy easing steps or by mentioning “vigilance” on inflation which in the past has been interpreted as a signal of imminent policy action.”

“We thus believe most scenarios are skewed towards a dovish outcome, lower eurozone yields and a weaker EUR. In case the ECB under-delivers, we think markets are less vulnerable to EURUSD upside given current positioning (see chart). We also see EURUSD rallies as counter-productive as they would increase the chances of future policy easing. We remain short EURUSD targeting 1.0900, with …read more

Source:: FX Street