Morgan Stanley are bullish on the EUR heading in to next week’s ECB decision

In the Eurozone, higher inflation rates enable the ECB to tighten policy faster and thus drive the EUR higher, but the EUR's limited use for international funding purposes mean its appreciation will not dampen risk appetite. The ECB meets next Thursday and is likely to enter tapering 2.0. Its first tapering round, which reduced monthly asset purchases from EUR80 to 60bln in April, helped to accelerate the EUR rally. Next week's tapering announcement comes at a time when economic indicators are strong and inflation expectations are rising. Hence, the ECB may find it difficult to blunt the EUR rally even with dovish communication.

20 Oct 2017 - 11:07- Economic Commentary- Source: Morgan Stanley

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