ECB's QE extension likely in December

The ECB is likely to be under increased pressure to act in view of the notable downward revision of the inflation outlook as the central bank expects the inflation  rate fall to 1.5% in 2016. Moreover, the bank is unforeseeable concerned about China in particular and Ems in general. ECB's QE program is flexiable to adjust the macroeconomics imbalance in the economy; Commerzbank expects the QE volume be extended as early as December. 

The extension of QE program turn out to be only moderate the increased flexibility in itself constitutes a EUR negative signal. It means that the ECB can react in a discretionary manner to inflation dampening events - e.g. a possible EUR appreciation. 

"Therefore, if the market finds the ECB's flexibility claim to be credible, then EUR strength will not be possible. So all in all the collapse in EUR-USD of more than one cent that we saw yesterday in reaction to the ECB was more than justified. In the near future everything will depend on how the factors the ECB considers decisive will develop", says Commerzbank.