The Bank notices that lower inflation will have an impact on inflationary expectations in the EMU and will ultimately force the ECB to expand the QE program, causing outflows from the EUR assets and EUR depreciation. The Bank notices that when these outflows occurred ahead of this QE we saw the EURUSD tumbling by 15 figures (1500 pips) but this time around the adjustment will be smaller. The Bank expects the QE to be expanded early next year.
Indeed an expansion of the QE program in Europe looks more and more likely. However, trading on it now looks very tricky. The EUR is a major funding currency now and it has gained recently on a sell off on global markets and repayments of this funding. So it’s like treading on a thin ice. It could probably be a good trade to sell the EUR on local highs versus fundamentally stronger currencies like USD and GBP.