The EUR/USD exchange rate continues to decline ahead of the upcoming European Central Bank (ECB) meeting on December 3, where analysts from ForTrader note that the central bank may expand the volume and structure of its quantitative easing (QE) program and lower the deposit rate.
Where Will the Euro Go After the ECB Decision?
In this context, several analysts and experts have expressed different views regarding the future prospects of the euro against the backdrop of the ECB’s decision.
Daisuke Karakama from Mizuho Bank expects a further decline in the EUR/USD pair to 1.03 if additional stimulus measures are adopted. In his view, weak inflation is a sufficient reason for action.
The question is what these actions will be. The ECB may either lower the deposit rate to -0.3% from the current -0.2%, or only expand the monthly purchase volume of assets under QE to 75 billion euros from the current 60 billion euros, or do both. More than 50 economists surveyed by Reuters agreed with the third option.
In Danske Bank, they expect a 0.2 percentage point reduction in deposit rates, not 0.1 as previously expected. The main argument is that none of the ECB’s governing council members have recently expressed aggressive negative assessments against introducing additional stimulus measures. It is also expected that QE will be expanded to 75 billion euros per month. The euro is expected to fall to 1.02 against the US dollar over the next month. However, in the longer term, the EUR/USD is expected to rise to 1.16 within a 12-month horizon.
BNP Paribas, like Danske Bank, expects the deposit rate to be lowered to -0.4% and an expansion of the QE program in terms of volume and duration. However, their expectations for the EUR/USD pair were somewhat different. If the ECB decides to strengthen monetary policy stimulus measures, there could be a sharp upward correction in the euro from the oversold zone, while the overall trend in the following year is expected to be downward.
Thus, keep your stops in place and closely monitor the situation, otherwise, simply move funds to safer assets or cash.
Discuss Forex Trading on the Forum
- Current Situation, Discussion and Forecasts for Forex (EURUSD, USDJPY, GBPUSD, USDCHF, AUDUSD, NZDUSD)
About EUR/USD
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- Goldman Sachs: EUR/USD Below 1.05 Until It Is
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“excerpt”: “The EUR/USD exchange rate is declining before the ECB meeting on December 3, with market expectations of expanded stimulus measures.”,
“slug”: “euro-exchange-rate-ecb-meeting-december-3”,
“short_description”: “ECB meets on December 3; market awaits stimulus measures. Where will the EUR/USD trade?”,
“faq_html”: “
FAQ
What is the ECB meeting on December 3 about?
The ECB meeting on December 3 is expected to discuss potential expansion of quantitative easing and possible changes to interest rates.
What impact could the ECB decision have on the EUR/USD pair?
The ECB decision could lead to a decline in the euro against the dollar if additional stimulus measures are introduced.
What are the expectations for the euro after the meeting?
Analysts expect the euro to weaken initially but potentially recover in the long term depending on the ECB’s decisions.
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