EUR/USD: Danske Bank believes monetary policy divergences will pull pair down to 1.10 within 3 months

In an analysis published today, Danske Bank refines its forecasts regarding the ECB's monetary policy after the particularly dovish meeting last week.

"The main signal given by the last ECB meeting was the confirmation of the ECB's willingness and ability to act if necessary. This dovish message was well received by the market with a broad rally in bonds and equities.

We now expect the ECB to continue its asset purchases beyond September 2016, the currently planned date.

The dovish statement from the ECB also had a bearish impact on the EUR/USD, and so we expect that the monetary policy divergence will continue to weigh on the pair, with an ECB that may expand its QE while the Fed prepares a rise in interest rates.

We ultimately anticipate a decrease of the EUR/USD to 1.10 within 3 months."