EUR remains a sell on rallies due primarily to aggressive central bank easing expectations.
From that angle this week’s main focus will be on Eurozone December PMI releases and the FOMC rate announcement.
Although business activity may continue to stabilise in Europe, it will unlikely compensate for weak commodity prices’ dampening the impact on price developments. Indeed, ECB Executive Board member Praet just recently stressed that further falling oil prices could push the Eurozone inflation rate below zero.
Most importantly he stressed that any central bank would prefer to look through a positive supply shock but that they may not have that luxury at present. This may indicate that the probability for additional policy action from the ECB in Q115 continued to rise.
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