EUR/USD likely to reach parity by end-Q2 2016

EUR/USD is now at November level, it traded down to a 1.0524 low as expected built up after the ECB meeting, then went up 450 pts in a single day on what was widely percieved to be an ECB disappointment and now is trading sideways.

ECB delivered the extended QE programme which was expected, but not the depo rate cut as it was priced in. Many were looking for expanded pace of asset purchases, but the central bank opted for a reinvestment programme as existing holdings mature.

Though Draghi insists the extension/reinvestment will add EUR680bn to the ECB's balance sheet by 2019, it is disappointing to a marketaccustomed to upfront easing and Draghi overdelivering.

"Nevertheless we feel comfortable with our forecasts and have left them unchanged this month (EUR/USD 1.07 at end-2015, 1.03 end-Q1 and parity by end-Q2). There are risks around that profile", says RBC Capital Markets in a research note.