Bank of America Merrill Lynch - "We have recently revised our EUR projections to reflect USD weakness following the last FOMC. Although we expect EUR/USD to weaken over the longer term, we expect it to remain supported as long as the Fed does not taper and the ECB remains on hold. However, we do not expect the EUR to strengthen much from current levels, as long as eurozone inflation and inflation expectations remain well bellow the 2% ceiling.
In this context, we expect the EUR risks from the ECB meeting to be balanced. A relatively dovish tone and consideration of another LTRO as a monetary policy loosening tool could lean against the recent EUR appreciation. However, we do not see sharp FX moves, as we expect the ECB to remain on hold, while Draghi’s tone at recent press conferences has already been dovish. Moreover, EUR/USD is well below the 1.36 level, which is the level when Draghi expressed concerns about the euro’s strength during the February ECB meeting."