EUR shorts increased last week as expectations rise for more ECB action

Draghi will deliver this time, and may not want to repeat the disappointment that took place after the December meeting. Since the December meeting, eurozone economic outlook and inflation have weakened, leading indicators have fallen short of expectations and global outlook has worsened.

Fundamentals definitely support the case of more easing at the ECB meeting on 10 March. More easing from the ECB on 10 March looks virtually certain. CFTC IMM Net Speculators' Positioning as at 01 March 2016 shows that net EUR shorts finally increased last week after seven consecutive weeks of shrinking as expectations rise for more ECB action.

Data also showed that JPY longs have increased for four consecutive weeks suggesting continued safe haven demand. USD longs have declined, while net sterling shorts increased, though they are below their February highs.

ING forecast the euro to dollar exchange rate to continue trading within a range of between 1.0800 and 1.0900. More notable losses are however likely against the higher yielders targetted by carry traders in their strategies, including AUD, NZD, ZAR to name but a few.