EUR/USD to trade side-ways into year-end

EURUSD is expected to trade side-ways into year-end as the data calendar is light and event risks (eg, Fed, ECB) are behind us. Yet, 2016 will bring about another year of significant EUR depreciation with the Fed/ECB policy divergence taking centre stage. 

Longer-term euro area inflation expectations have once again declined following the December ECB meeting, and a muted inflationary pressure is expected over the forecast horizon. Further, the EUR REER is close to its January levels, when the ECB first announced QE. 

"We expect this will ultimately imply longer or greater policy accommodation that could push the EUR to a lower trough than we had previously forecast", says Barclays.