FXStreet (Delhi) – Jane Foley, Research Analyst at Rabobank, suggests that the Draghi’s remarks in an Italian newspaper over the weekend that it was “too early” to pass judgement on lowering the deposit rate may be reference to the fact that all central bank policy decisions are data dependent. Key Quotes “By commenting last night that ECB monetary accommodation is to be examined in December and that the Council is willing to act, Draghi is continuing to suggest that unless the Eurozone economic outlook takes an unexpectedly turn for the better, that further policy measures are likely to be forthcoming next month. In contrast, we expect the Fed to hike interest rates in December.” “During the course of October the majority of FOMC members indicated that they perceived the door for a December rate hike to still be open. The resilience of the hawks to disappointing data has led many analysts to suppose that a December rate hike could be about maintaining credibility. The Fed may also be wary about feeding the perception that the US economy is too weak to take a modest rate hike since this could have a negative impact on confidence and potentially on consumer and business behaviour.” “Whether or not the Fed does hike in December, due to the current modest level of price pressures in the US and the still restrained nature of wage inflation, there are very few forecasters that expect the pace of Fed policy tightening over the next year or so to be anything other than moderate.” “In recent months the value of the USD has been pared as investors have adjusted to the likelihood that the Fed is likely to take a less forceful policy decisions over the next year or so. Consequently between mid July and mid October, the majority of G10 currencies outperformed the USD as the market adjusted its expectation regarding Fed policy.” “That said, the Fed and the BoE are the only G10 central banks not to have either cut rates or maintained an asset purchases policy in 2015. Looking ahead to 2016 there is still potential for several other G10 central banks to increase the degree of monetary stimulus on offer including the ECB, the BOJ, the SNB, the Riksbank, the Norges Bank and RBA and the RBNZ.” “This means that even though the Fed may not be hiking interest rates aggressively during the next year or so, it remains the most hawkish G10 central bank. As a consequence we maintain that the timing and pace of Fed tightening into 2016 will guide the extent of any broad-based USD gains but that policy easing by other central banks will ensure the USD can continue to move moderately higher. On balance we see little reason to alter our long held forecast that EUR/USD will edge lower towards 1.05 medium-term.” For more information, read our latest forex news.