ECB should carefully assess current risks

ECB President Mario Draghi stuck to his line in the EU parliament yesterday. Of course if uncertainty leads to unwarranted effects and risks rise the ECB will react immediately. 

However, at present it is still too early to be able to assess whether the current risks are temporary or will be permanent, so no action is required, says Commerzbank. Following three days of EUR-USD moving south some profits were taken just ahead of the 1.11 mark and shorts were covered. 

A glance at the recent data and yesterday's PMIs makes an extension of the QE programme as early as December rather unlikely. Today's German ifo index will reflect the falling demand from the EM countries - in particular in the expectations. It is unnecessary to re-evaluate the overall situation. So all in all - and irrespective of timing issues - that leaves the simple realisation: ECB and Fed are drifting in opposite directions as regards their monetary policy. That points towards lower EUR-USD levels. 

Nevertrheless, there will be a lot of noise: uncertainties as regards the timing of the Fed lift off and new action on the part of the ECB, uncertainties as regards the development in the Emerging Markets. However, it is important to remember one straight forward realisation should always be borne in mind when considering the fluctuations in EUR-USD, suggests Commerzbank.