Euro declined substantially today on the surprisingly soft stance by the ECB

The euro declined substantially today on the surprisingly soft stance by the ECB. Given that a 10bp deposit rate cut is expected in December. 

The experience from H1, when EUR/USD bottomed out just a few months after the QE announcement in January, implies that additional easing and thus EUR/USD downside is likely to unfold in the coming months. Hence, the low in EUR/USD will arrive in 1-3M and still look for a move higher in the cross towards 1.12 and 1.20 in 6M and 12M, respectively, as warranted by medium- to long-term fundamentals.

"We revise down our 1M and 3M EUR/USD forecast from 1.12 to 1.10 and 1.08 respectively, as a further deposit rate cut - on the margin - is more EUR-negative compared to our previous call of an extension of the QE programme. We maintain our view that EUR/USD is likely to see diminishing losses on relative rates as the sensitivity of EUR/USD to this has declined", says Danske Bank.