LONDON, Oct. 21, 2015 /PRNewswire/ -- Traders can expect extended pressure on the euro after Friday's weak CPI reading for the Eurozone met market expectations - increasing the likelihood of the European Central Bank extending its quantitative easing programme in the near future.
Friday's consumer price index data showed a 0.1% annual decrease from September 2014 to September 2015. This reading also represented a decline from August's slight rise in inflation. Policymakers cited low energy prices as one of the reasons for continued low inflation.
"This data suggests that the European Central Bank might consider extending its current quantitative easing programme, as Eurozone inflation continues to read well below the 2% target," explains Jarratt Davis, Head of FX at Smile Global Management.
"As a result, traders can expect sustained pressure on the euro until inflation start to pick up. Policymakers at the European Central Bank have indicated that should inflation readings continue to disappoint over the coming months, they are ready to consider increasing its existing €60 million per month stimulus programme.
"Traders should monitor news from the European Central Bank, along with news from key policymaker members and their thoughts on future moves regarding quantitative easing."
With speculation rife about the Federal Reserve and when - rather than if - it will raise interest rates, combined with suggestions that extended quantitative easing from the European Central Bank is a possibility, there could be opportunities for traders on the horizon.
"There's certainly a strong possibility that the dollar will gain on the euro in the short term, considering each of the respective central bank's current agendas. It's all a question of timing. This month's FOMC meeting at the end of October is another important event that traders should keep a close eye on."
For further market commentary from Jarratt Davis, please email [email protected].