Euro Retreats As ECB Changes Forward Guidance To Signal Rate Reduction
25 July 2019 - 6:43PM
RTTF2
The euro retraced its recent gains against its key counterparts
in the European session on Thursday, after the European Central
Bank left its key rates unchanged and tweaked its forward guidance
to indicate that it is planning an interest rate cut in the
immediate future.
The Governing Council, led by ECB President Mario Draghi, kept
the key interest rates unchanged after the policy session in
Frankfurt, as expected.
The main refi rate is currently at a record low zero percent and
the marginal lending facility rate is at 0.25 percent. The marginal
lending facility rate is at 0.25 percent.
"The Governing Council expects the key ECB interest rates to
remain at their present or lower levels at least through the first
half of 2020, and in any case for as long as necessary to ensure
the continued sustained convergence of inflation to its aim over
the medium term," the bank said.
The ECB said policymakers stressed "the need for a highly
accommodative stance of monetary policy for a prolonged period of
time", citing the persistently below-target inflation levels.
"Accordingly, if the medium-term inflation outlook continues to
fall short of its aim, the Governing Council is determined to act,
in line with its commitment to symmetry in the inflation aim," the
bank said.
ECB President Mario Draghi will give a press conference in
Frankfurt at 8.30 am ET.
Survey from Ifo Institute showed that Germany's business
confidence weakened more-than-expected in July.
The business climate index fell to 95.7 in July from revised
97.5 in June. The score was forecast to fall to 97.2. The initial
reading for June was 97.4.
The currency showed mixed trading against its major counterparts
in the Asian session. While it fell against the greenback and the
yen, it was steady against the franc and the pound.
The euro dipped to 120.17 against the yen for the first time
this year. This followed a high of 120.63 hit at 7:45 am ET. If the
euro slides further, 117.00 is possibly seen as its next support
level.
Data from the Bank of Japan showed that Japan producer prices
rose 0.7 percent on year in June - shy of expectations for 0.8
percent and down from the upwardly revised 0.9 percent gain in
May.
On a monthly basis, producer prices eased 0.1 percent after
sliding 0.2 percent in the previous month.
The European currency depreciated to a 2-month low of 1.1111
against the greenback, from a 2-day high of 1.1161 it touched at
7:45 am ET. The euro is poised to find support around the 1.09
level.
The euro slipped to near a 5-week low of 0.8892 against the
pound, from a high of 0.8929 seen at 2:45 am ET. The currency is
likely to find support around the 0.88 level.
The single currency declined to 1.4582 against the loonie from
Wednesday's closing value of 1.4634. This came after an uptick to
1.4654 at 7:45 am ET. The euro is seen finding support around the
1.44 level.
The common currency retreated from its early weekly highs of
1.6017 against the aussie and 1.6674 against the kiwi, falling to
1.5939 and 1.6589, respectively. Next immediate support for the
euro is possibly seen around 1.57 against the aussie and 1.64
against the kiwi.
In contrast, following more than a 2-year low of 1.0962 hit at
3:15 am ET, the euro bounced back to 1.0992 against the franc
following the ECB decision. Should the euro rises further, 1.11 is
possibly seen as its next resistance level.
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