Bank of Tokyo-Mitsubishi on the prospects for ECB QE and the euro

Bank of Tokyo-Mitsubishi on the prospects for ECB QE and the euro:

The 11.8% depreciation of the euro versus the dollar in 2014 was the largest since the 12.6% decline in 2005, notes Bank of Tokyo-Mitsubishi (BTMU).
“We were somewhat surprised by the degree of euro selling into the end of 2014 fuelled in part by the increased expectation of sovereign debt QE by the ECB. We like most in the market expect the ECB to announce a QE program at the next meeting on 22nd January,”
“We now expect a sovereign debt QE program of at least EUR 500bn to be announced in January. At least that amount is required in order to expand the balance sheet to the EUR 3trn level reached in early 2012,”
“The greater the QE sum is above the EUR 500bn level, the greater the scope for further EUR/USD selling,”
“The added political uncertainty at the outset of 2015 mixed with the high probability of the launch of sovereign debt QE will result in a further weakening of the euro. We show a bias for a more pronounced weakening in the first half of the year as US market interest rates finally respond to pending FOMC tightening,”
BTMU sees EUR/USD at 1.15 in 6 months and 1.12 by the end of the year.