Fund managers have forecast falls in the Euro and a widening divergence of yields between the US and Europe after the European Central Bank's (ECB) extended its quantitative easing programme until December 2017.
The European Central Bank's monthly buying programme will be reduced to €60bn (£50.55bn) from €80bn (£67.4bn) from April, however it stated it would be willing to increase the programme if the outlook becomes less favourable.
The bank's action comes as political uncertainty continues to dog confidence in European markets and inflation remains below target.
Tim Graf, head of macro strategy for Europe at State Street Global Markets, said the decision was not a surprise.
He said: “Last weekend’s Italian referendum result was a timely reminder that political tensions within the Eurozone remain acute and threaten the upbeat tone to recent European data and the stability of the financial sector," he said. "The euro looks likely to test recent lows once more.”
Marilyn Watson, head of global fundamental fixed income strategy at BlackRock, said the move to reduce the amount of bond purchases was effectively tapering, though she noted that Mario Draghi, president of the European Central Bank, vehemently denied this.
She said: "The ECB’s announcement, in our view, continues a trend among major central banks of moving away from ever-looser monetary policy stances."
Paul Shanta, co-manager of Old Mutual Absolute Return Government Bond fund, predicted that given the increasing divergence of economic fortunes and policy in the US and Europe, US yields are likely to continue widening versus those in ‘core’ Europe.
He also saw a short-term fall in the Euro.
Mr Draghi said: "The move should again dampen the volatility of rates both in the eurozone and globally, as well as provide further support to asset prices.
"We expect to see a re-pricing higher in European inflation expectations as Draghi has again proved he is willing to ignore his critics and push on, doing what it takes to stabilise the euro area."
