FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, notes that the EUR/USD has backed away from the 1.15 level this morning as dovish comments from the ECB’s Nowotny threw the spotlight away from the US’s misses on inflation and back to those of the Eurozone. Key Quotes “Nowotny’s comments that the ECB is “clearly missing” its inflation target could set the tone for next week’s ECB meeting. Preliminary September Eurozone CPI inflation data registered a disappointing -0.1% y/y and this is expected to be confirmed tomorrow with the publication of the final data.” “In reflection of the drop in expectations regarding a 2015 Fed hike, the USD has been the worst performing G10 currencies on a 1 mth view. During this period EUR/USD has gained 1.49%. Since June 1, the EUR has climbed 4.67% vs. the EUR and the value of the Eurozone’s effective exchange rate has risen around 3.5%. The stronger tone of the EUR is unlikely to be welcomed by the ECB.” “Despite the introduction of QE by the ECB at the start of the year, the Eurozone is still showing limited signs of reflation and the former tone of the currency will be working against the Bank’s effort to stimulate growth and inflation.” “We see potential for the ECB to announce an extension in its asset purchases programme potentially as soon as December and next week’s ECB meeting could provide a strong signal as to whether or not the ECB is on course for strengthening its policy reaction.” “Even if the ECB does increase the size or scope of its asset purchase programme we are sceptical whether the EUR can regain the fervent downside momentum that was evident at the start of the year.” “Without a broadbased increase in risk appetite the ECB may therefore find it difficult to inject substantial downside pressure on the EUR in the coming months. That said, the USD is not a risky currency. Given that expectations regarding the course of US interest rates have already undergone a significant re-adjustment, we see scope for upside potential in EUR/USD to run out of steam and for the EUR to adopt a more nervous position ahead of next week’s ECB meeting.” For more information, read our latest forex news.