The European Central Bank sent a very dovish message from its October meeting. Due to a weakened inflation outlook, the ECB will reassess monetary policy in December and it is ready to use all the tools in its box.
The central bank is expected to cut its deposit rate by 0.10 percentage points to minus 0.30% in December and to keep the door open for further rate cuts, says Danske Bank. The ECB also looks set to announce that QE will continue after September 2016. The prospect of further policy easing by the ECB this year is negative for the EUR.
The EUR/USD pair is expected to fall to 1.08 on a 3M horizon, forecasts Danske Bank.