The EUR has been capped of late, mainly on the back of ECB President Draghi reiterating that the ECB is ready to consider more aggressive policy action such as quantitative easing if the inflation outlook deteriorates.
However, it must still be considered that this is unlikely to happen anytime soon.
In fact, central bank Governing Council member Nowotny stressed already that it is not yet the right time for unconventional policy measures. It appears that further rising downside risks to inflation are needed in order to increase the probability of more aggressive policy action.
For that to happen a further appreciating currency and/or weaker growth momentum is needed.
Accordingly, it cannot be excluded that the single currency is facing additional upside risk, at least in the short-term.
Credit Agricole