Will ECB’s QE produce the intended results?

Germany's ZEW economic sentiment for the month of March is scheduled for release tomorrow. Markets are expected to closely monitor the survey following the launch of the bond buying programme by the European Central Bank. Economists expect the headline index to improve and forecast it to stand at 58.9.

Also, Eurozone's consumer price index and ZEW survey are due tomorrow which will show a clear picture for the common currency area.

"(It's) too early to be absolutely sure, but the signs are more positive, helped by a weaker euro, lower oil price and quantitative easing," said Hann-Ju Ho, economist at Lloyds Banking Group.

However, the ECB policymakers cautioned on Saturday against excessive optimism following quantitative easing programme, with Governing Council member Ignazio Visco saying interest rates could not stay at present levels forever.

He noted that the euro had fallen more rapidly than expected since the central bank first suggested the move. There were risks the QE programme could exceed its goal, along with pushing the prices of financial and real estate assets higher.

"We must try to get inflation close to 2 percent as quickly as possible," he told a conference in Cernobbio. "We can't keep interest rates at zero forever or for an ultra-prolonged period of time".

EUR/USD slumped to a fresh 12-year low on Monday as the recent jump saw fresh selling interest suggesting that investors were still very bearish on the common currency. It dropped to 1.0457 (Jan 2003 low) in the early Asian session, after a brief bounce above 1.0600 seen overnight. It currently trades at 1.0525 levels. The pair is expected to see some major action as markets gear up for the ZEW survey reports due tomorrow and the FOMC meeting later this week.

"Even though EUR/USD looks oversold both technically and according to our short-term financial models, we still expect it to maintain a downside momentum as EUR assets will likely continue to perform due the better economic outlook and due to the 'hot potato effect' of negative euro rates and excess liquidity driving investors to riskier assets", suggested Morten Helt, Senior Analyst at Danske Bank.