From the FXWW Chatroom: We expect the ECB to extend its QE program at its meeting on Thursday, rolling out the formal target end date from March 2017 to September 2017. In order to address scarcity issues, the central bank will also likely announce some changes to the program parameters, perhaps raising the issue limit for non-CAC bonds, removing the deposit rate floor or changing the method for allocating purchases across sovereigns. While an extension of the program in this manner would be marginally negative for the EUR, we think impact would likely be limited. The underlying run rate of purchases would remain the same, and we do not expect a cut in the ECB’s deposit rate. Some measures the ECB could take to address scarcity could also result in a steepening of the core market yield curve, which might confuse market views on FX. Similarly, a decision to leave policy unchanged for now could see the EUR gain some ground, but we also would not anticipate a major topside breakout. Overall, we do not view this meeting as a likely catalyst to break EURUSD out of its 1.10-1.14 broad range, with the evolution of Fed expectations likely to be much more significant in that regard.
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