EUR/USD up 58 pips to 1.0973 today

During the last few days our risk index moved into less risk seeking territory, mainly on the back of falling equity market volatilities. However, due to the Fed's more hawkish monetary policy stance, the most recent disappointment by the BoJ and as there is little scope of the ECB turning more aggressive anytime soon caution may be warranted for now.

When it comes to the ECB it must be noted too that central bank member Vasiliauskas just yesterday stressed that no additional stimulus measures will be required. Such a stance has been shared by other ECB members too. Even if a more dovish monetary policy stance may be required later next year, the ECB will need more time in order to evaluate the latest policy measures' impact on the economy.

In an environment of stable ECB monetary policy expectations and more unstable risk sentiment it cannot be excluded that the single currency will face position squaring related upside risk towards the end of the year.

As this stands in contrast to our own forecasts, we expect any bigger corrections to prove unsustainable and rallies above 1.10 a sell.

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