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Euro Erases ECB-led Losses After Draghi's Speech

Euro Erases ECB-led Losses After Draghi's Speech

The euro trimmed its ECB-induced decline in the New York session on Thursday, as the European Central Bank President Mario Draghi’s tool kit failed to inspire market participants, who were expecting much more stimulus measures before his departure.

In his press conference in Frankfurt, Draghi said that incoming information pointed to a more protracted weakness of the euro area economy, the persistence of prominent downside risks and muted inflationary pressures.

“Measures of underlying inflation remained generally muted and indicators of inflation expectations stand at low levels.”

The Governing Council assessed that a highly accommodative stance of monetary policy is still needed for a prolonged period of time and it would continue to stand ready to adjust all of its instruments to ensure that inflation moves towards its aim in a sustained manner, he added.

Inflation forecast for this year was cut to 1.2 percent from 1.3 percent. For 2020 and 2021, inflation projections were reduced to 1 percent and 1.5 percent, from previous forecasts of 1.4 percent and 1.6 percent, respectively.

Growth outlook for this year was slashed to 1.1 percent from 1.2 percent, while that of 2020 was trimmed to 1.2 percent from 1.4 percent.

The central bank slashed the deposit rate by 10 basis points to -0.50 percent, while it left the main refinancing rate and the marginal lending rate unchanged at 0.00 percent and 0.25 percent, respectively.

The ECB said it would make monthly asset purchases of EUR 20 billion from November 1.

The central bank tweaked its forward guidance, saying that it “now expects the key interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics.”

Preliminary figures from Eurostat showed that Eurozone’s industrial production continued to decline in July, albeit at a slower pace compared to the previous month.

Industrial production dropped 2 percent year-on-year following a 2.4 percent slump in June, which was revised from 2.6 percent. Economists had forecast a 1.3 percent decrease.

Final data from Destatis showed that Germany’s inflation eased as estimated in August.

Consumer prices climbed 1.4 percent year-on-year in August, slower than the 1.7 percent increase in July.

The currency has been falling against its major counterparts in the previous session after the ECB decision.

The euro rose to more than a 4-week high of 119.52 against the yen, from a weekly low of 117.56 hit at 8:45 am ET. Next key resistance for the euro is likely seen around the 122.00 level.

Data from the Bank of Japan showed that Japan producer prices fell 0.3 percent on month in August – shy of expectations for a drop of 0.2 percent following the flat reading in July.

On a yearly basis, producer prices sank 0.9 percent – again missing estimates for a fall of 0.8 percent following the 0.6 percent decline in the previous month.

The euro recovered to 1.1061 against the greenback, from a 9-day low of 1.0927 seen at 8:45 am ET. The currency is thus heading to pierce a 3-day high of 1.1068 set in early deals. The euro is poised to challenge resistance around the 1.12 mark.

The single currency gained to 1.0953 against the franc, following a weekly decline to 1.0851 recorded at 8:30 am ET. Further uptrend may take the euro to a resistance around the 1.13 area.

Following near a 3-month low of 0.8885 seen at 8:45 am ET, the euro rebounded to 0.8967 against the pound. This may be compared to a 2-day high of 0.8972 set at 7:45 am ET. Should the euro strengthens further, it is likely to face resistance around the 0.91 region.

Survey data from the Royal Institution of Chartered Surveyors showed that UK property sales are expected to fall over the next three months as Brexit uncertainty continues to drag sentiment.

The index for expected sales volume for the coming three months declined to -23 in August from -4 in July. The house price balance rose to -4 from -9.

The euro rose back to 1.4593 against the loonie, not far from a 6-day peak of 1.4594 it recorded at 7:45 am ET. This followed a 2-1/2-year decline to 1.4434 at 8:45 am ET. The euro is likely to challenge resistance around the 1.48 region, if it gains again.

Having dropped to near a 2-month low of 1.5906 versus the aussie at 8:45 am ET, the euro bounced back to 1.6083. The euro is seen finding resistance around the 1.63 mark.

Following more than a 5-week low of 1.7001 marked at 8:30 am ET, the euro reversed direction, reaching as high as 1.7206 against the kiwi. Continuation of the euro’s uptrend may lead it to a resistance around the 1.73 region.

Data from Statistics New Zealand showed that New Zealand food prices rose a seasonally adjusted 0.4 percent on month in August.

Unadjusted, prices were up 0.7 percent on month.

Looking ahead, U.S. monthly budget statement for August is scheduled for release at 2:00 pm ET.

The material has been provided by InstaForex Company – www.instaforex.com