Post ECB Investment Bankers analyses: Which important facts about ECB meeting do you need to know and what is in the future for EURUSD?
9 December, AtoZForex – Following yesterday’s meeting of European Central Bank (ECB), it is high time to analyze the decisions of the EU policymakers and sketch the future plans. We have looked at the expectations of the Major EU Banks.
Post ECB Investment Bankers analyses
Yesterday, the ECB has announced its decision in regards to interest rates, The ECB decided to keep the interest rates across the bloc unchanged at 0,00%. The bank also has stated the following:
‘The Governing Council continues to expect the key ECB interest rates to remain at present or lower levels for an extended period of time, and well past the horizon of the net asset purchases.’
Additionally, in regards to non-standard monetary policy measures, the Governing Council decided to continue its purchases under the APP at the current pace of €80 billion until the end of March 2017.
ANZ: Short EURUSD ahead of Fed meeting
The Australia and New Zealand Banking Group called ECB decision a “bazooka.” It believes that the EUR will underperform against USD, NZD, AUD and Asia in the near future.
Moreover, ANZ analysts see the EURUSD will shift towards parity in the coming months. The bank believes that yesterday’s ECB conference is backing this view. However, ANZ experts see the material event risks facing the EU bloc. This includes the series of elections across the euro area, as France, the Netherlands and Germany will hold the elections in 2017.
The Bank strongly recommends staying SHORT EURUSD and selling rallies ahead of FOMC rate decision.
Danske Bank: EURUSD is a sell on rallies
The bank highlights that the ECB prolonged its bond buying by nine months to December 2017. Moreover, it has mentioned that the central bank has reduced its monthly purchases from 80 billion euros to 60 million euros.
Moreover, the bank believes that Mario Draghi has expressed a very dovish tone during the Q&A session. Danske Bank also states that the market seemed to “accept that the lower QE purchases do not imply the ECB is on a tapering path.”
Furthermore, the bank stresses that the EURUSD initially hiked on the announcement of ECB, but then dropped after the market realized that the decision was in more dovish direction. Analysts from Danske Bank forecast that the EURUSD will trade in a range between 1.05-1.10. The balance of risks is inclined towards a break to the downside, according to the bank’s view. The Danske Bank further stresses that the EURUSD is a sell on rallies within its range. The bank states:
“We forecast EUR/USD at 1.05 in 1M and 1.04 in 3M before a sustained move higher to 1.08 in 6M and 1.12 in 12M.”
BNP Paribas: EURUSD to hit 1.04 in Q1 2017
The Paris-headquartered bank highlights that the ECB announced that it has decided to prolong the QE program beyond March 2017, but at a slower pace of EUR 60bn per month. Moreover, such change was cushioned by a longer extension of the program.
Additionally, BNP Paribas analysts stress that the ECB also changed the modalities of its program to allow purchases of bonds with yields below the -0.4% deposit rate and to buy bonds with maturities as long as 1-year.
The bank believes that the markets now shift their focus to the FOMC meeting next week. Also, markets expect the Federal Reserve (Fed) policymakers to hike the interest rate across the US by 25bp. Following on this, the bank states that it sees almost no scope for this week’s meeting to drive the USD up further in the near future. Yet, the greenback can advance further in 2017, according to BNP Paribas.
Ultimately, the investment banker expects the EURUSD to weaken further in the New Year. The level of 1.04 is targeted by the end of Q1 2017.
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