The EUR has been under pressure for most of the last few weeks, mainly due to firm expectations of the ECB considering additional policy action such as cutting the deposit rate further and extending QE in December.
This is especially true after ECB members such as Chief Economist Praet stressed this week that inflation expectations are still fragile and at risk of becoming de-anchored. Considering such rhetoric the central bank is unlikely taking much comfort from any better than expected incoming data.
Given little scope of falling central bank easing expectations and as central banks such as the Fed should stay on track towards considering higher rates in December, we believe the EUR will remain a sell on rallies.
In the very short-term, however, increased speculative short positioning may have increased position squaring related upside risk.
‘This content has been provided under specific arrangement with eFXnews.
