An announcement on Quantitative Easing by the European Central Bank is imminent. But is it already priced into EUR/USD?
Greg Gibbs at RBS discusses an option of a rapid slide in the pair, that could send it all the way to parity:
Here is their view, courtesy of eFXnews:
“The upside risk for EUR on market disappointment over the size of ECB QE on Thursday is relatively low…
On the other hand, the risk is high that the EUR falls significantly if the ECB delivers a sizeable or open-ended QE program.
The market is still coming to terms with the downside potential for EUR; it is still far from being very historically cheap in a long term sense, there is limited historical technical support until the lows below parity set in the early-2000s, and it is not clear who is going to step into buy it at any near-by levels if the ECB attempts to over-whelm market expectations.
In coming months, after the probable introduction of QE, EUR rates will probably drift towards their -0.20% floor at the same time as a EUR downtrend persists. As such, it is not hard to imagine EUR’s recent rapid slide continuing as a trend until parity is reached.â€
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