ECB unlikely to force EUR/USD lower with higher rate cuts

ECB might not go higher than the priced in rate cuts and weigh on EUR/USD in near future. It can go to the extent of 12bp by mid 2016 is what some of the market participants expecting. The pair is currently at 1.952 and might stay above the March lows, although with the risk of downside of 1.08 in coming months. 

As there would be expectations on the possibitly of further ECB cuts and as there will be first rate hike from US Fedral Reserve, the pair might also be weighed on. It is skeptical that the ECB settles on -30bp for the deposit rate and EUR/USD will be continued to be pressurized to go much lower beyond Q1.

With ECB waiting for the economic impact of previous easing and the shallow US Fed hiking cycle is adjusted into the money markets, the downside risks are set to wane and the factors supporting EUR should slowly dominate.

"In terms of the impact on EUR/USD, the ECB will be satisfied to see it stop strengthening, rather than force about a drop towards, say, parity. While the USD is important for the effective euro, the CNY has a higher weight, hence in terms of the impact on inflation, the CNY should be followed more closely than the USD", says Danske Bank.