RBS makes the case against the euro
For the December's ECB meeting, RBS Economists expect a 20bps cut in the deposit rate to -0.40%, an acceleration of QE purchases to EUR85bln/month and an extension of the QE programme to March 2017.
"If delivered, this would be more aggressive than the (Bloomberg) consensus expects. The market reaction to the BoJ and Riksbank policy statements show that rate cuts rather than QE extensions are the more powerful driver of currencies on the announcement of easier policy.
Positioning looks relatively light compared to earlier ECB policy easing moves; latest IMM data indicate modest speculative EUR/USD shorts and the one week riskreversal is bid for EUR calls. The ECB probably has (more) currency weakness very high on its list of priorities. In pursuit of that, the ECB may well cut and stress that rates are not yet at the lower bound," RBS argues.
"We like short EUR/USD exposure into the meeting and beyond," RBS advises.
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