The euro is down sharply after reports that the ECB didn't fully sterilise bond purchases last week.

The ECB bought EUR 203bn and only sterilised EUR 194bn. Thus, it has left EUR 9 bn sloshing about the European financial system. This is QE- extremely light - more like QE- zero than diet, but it is a form of QE nonetheless and as such the euro is getting hit.

QE has the biggest potential downward impact on the euro especially vs. sterling and the dollar, as it means there are excess euro in the system. This is likely to weigh on the single currency on a broad-based basis. 

In the very short term 1.3325 - the 100-day sma - is the next key support ahead of 1.3286 - yesterday's low. However, this isn't formal QE and is still a very small amount of euro for the size of the Eurozone economy and compared with QE in the US and UK, so we could see a pullback. 1.34 remains stiff resistance ahead of 1.3415 - Tenkan line.

Best Regards,

Kathleen Brooks| Research Director UK EMEA |

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