EURUSD range-bound post disappointing ECB

The ECB's policy decision last week fell well short of market expectations. Arguably, the most important disappointment came from the absence of strong forward guidance with regard to further potential cuts to the depo rate. Given these signals from the ECB, and with the Fed December hike almost fully priced, the EURUSD is expected to trade sideways in the near term. Over the medium term however, it is believed that a weaker EUR will be necessary to fulfil the ECB's mandate in a timely manner and continue to forecast 0.95 by year-end 2016.

"We have closed our EURUSD short recommendation and prefer to sit on the sidelines for now, although a further positioning squeeze up to 1.12 would likely make us reconsider our position", notes Barclays. 

On the data front, a technical rebound is expected in German IP (Monday) after two consecutive declines, especially since the IFO survey for October pointed to some increase in output, but this is unlikely to cause a material market move. Moreover, French IP (Thursday) is likely to remain flat in October as a result of a foreseen slight increase in manufacturing offset by a drop in energy. Finally, the euro area Q3 final GDP estimate (Tuesday) is expected to be confirmed at 0.3% q/q, softening from 0.4% q/q in Q2.