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"We do not think the EUR should draw sustained support from headlines Tuesday indicating that the ECB governing council have agreed that asset purchases should be tapered rather than stopped abruptly when the time comes to exit QE.
The news story is more about the ECB's eventual exit strategy rather than any indication of the actual time frame for exit, and a subsequent comment from an ECB spokesman indicated the ECB has not discussed reducing bond purchases. With core inflation at only 0.8% and the ECB likely to have to revise down its inflation forecast in its December projections, we think talks of tapering are very much misplaced.
Our economists continue to expect the ECB to announce an extension of asset purchases in December, keeping any concerns about exit off the table for most of 2017.
We expect the EUR to hold up well vs. most G10 currencies this year, but lose ground vs. the USD as the Fed delivers a December rate hike".
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