EUR/USD: BNP expects ECB to reduce deposit rates by 0.2%, and still expects a drop to parity by Q3 2016

In a note published today, BNP Paribas announced that its economists have revised their forecasts for the ECB meeting on 3 December, and now expect a deposit rate reduction of 0.2%, and not 0.1% as was previously anticipated.

"This adds to our forecast of an increase in QE by 10 billion euro per month, and a one year extension (until September 2017). With regard to the deposit rate, the rate market is currently taking into account a 0.15% decrease in the deposit rate.

We therefore expect the euro to remain under pressure, especially as our positioning analysis shows a rather light short positioning right now.

Moreover, we still expect the EUR/USD pair to touch parity by Q3 2016."