The main event of the past week was the long-awaited announcement of the quantitative easing program by the European Central Bank – as they say, better late than never. The ECB has joined the global currency war. This made EUR/USD decline to the target levels in the 1.12 area.
What’s next? Greek Parliamentary election on Jan. 25 will be a new challenge for the euro. According to the latest polls, the left coalition Syriza is increasing its lead over the ruling party. Syriza will likely win and even if it fails to gain a majority, it might be able to form coalition with other parties like socialists and euro skeptics. Syriza’s victory will be negative for euro as the uncertainty about the euro area’s future will increase in this case. One can expect that the uncertainty won’t dissolve quickly and that the single currency will suffer.
In addition, next week pay attention to the meetings of the European finance ministers on Monday and Tuesday – they can make important comments about the ECB’s decision and the results of Greek election. Also don’t miss the region’s inflation figures on Friday.
Below 1.12 the next target for EUR/USD will be 1.10. Some reason for correction up may be provided by the Federal Reserve’s meeting on Wednesday if the US central bank signals that it won’t hurry to raise interest rates.