Expectations from ECB likely heightened

EUR/USD recorded its largest drop since QE was announced, following ECB's October meeting, when President Mario Draghi hiked market anticipations for an action in December meeting.

FX markets were looking at Fed's direction from the time of QE launch by ECB in March. But ECB seems to be driving EUR/USD (atleast co-piloting). Currently, EUR/USD is trading at 1.0794.

ECB delivered consistently, more than what was expected by markets in Draghi's Presidency, whose repeated comment was "whatever it takes" to return inflation to its mandated level.

"With us now expecting the Fed to raise rates at its December meeting, EUR/USD may be hit by a "double whammy" heading into year-end. Regardless, over the coming year, the paths of both central banks' policy rates are set to move in opposite directions, adding the potential for large policy divergence to the already large economic divergence", says Barclays in a research note. 

The amount of policy divergence will determine the speed of EUR/USD depreciation, which is a wide range and also skewed to the downside.