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Euro Advances After ECB Chief Draghi Signals Confidence In Inflation Pick-up


The euro climbed against its major counterparts in the European session on Thursday, as the European Central Bank President Mario Draghi said that acceleration in the region's economic momentum give confidence that inflation will head towards 2 percent goal.

Speaking at a press conference in Frankfurt, Draghi said that the region's economic momentum has strengthened further, increasing confidence that inflation will converge to close to but below 2 percent.

However, Draghi reiterated his commitment to continue stimulus measures amid soft inflation.

"An ample degree of monetary stimulus remains necessary for underlying inflationary pressures to continue to build up," Draghi said.

"The recent volatility in the exchange rate represents a source of uncertainty which requires monitoring with regard to its possible implications for the medium-term outlook for price stability," he cautioned.

The Governing Council left the key interest rates unchanged after the conclusion of the first policy-session for this year.

The main refi rate is currently at a record low zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is 0.25 percent.

Survey data from Ifo institute showed that Germany's business confidence improved in January.

The business confidence index rose to 117.6 in January from 117.2 in December. The expected score was 117.0.

The currency showed mixed performance in the Asian session. While it rose against the greenback and the yen, it dropped against the franc and the pound.

Extending early rally, the euro appreciated 0.7 percent to more than a 3-year high of 1.2496 against the greenback. The euro is poised to challenge resistance around the 1.27 region. The pair closed Wednesday's deals at 1.2407.

The euro advanced to a 2-day high of 136.07 against the yen, up from a low of 135.04 hit at 8:00 am ET. Further uptrend may take the euro to a resistance around the 137.00 mark. The pair was worth 135.53 when it closed deals on Wednesday.

Preliminary data from the Chain Store Association showed that Japan's supermarket sales recovered in December. After store adjustment, supermarket sales climbed 0.9 percent year-on-year in December, after falling 0.6 percent in November.

Having fallen to near an 8-month low of 0.8687 against the pound at 3:30 am ET, the European currency bounced off to 0.8742 after Draghi's remarks. The euro is seen finding resistance around the 0.89 level.

Data from UK Finance showed that UK mortgage approvals fell to the lowest level in more than three years in December.

The number of mortgages approved in December totaled 36,115 compared to 39,007 in November. This was the lowest since April 2013, when approvals totaled 33,986.

The euro advanced to 1.1737 against the Swiss franc, following near a 4-week low of 1.1673 hit at 8:00 am ET. On the upside, 1.20 is possibly seen as the next resistance for the euro.

The single currency spiked up to near a 2-year high of 1.5404 against the loonie and a new 3-week high of 1.6985 against the kiwi, from its early lows of 1.5268 and 1.6809, respectively. The euro is likely to test resistance around 1.55 against the loonie and 1.71 against the kiwi.

The euro strengthened to 1.5473 against the aussie, its highest since December 21, 2017. This marks a 0.9 percent gain from a low of 1.5335 hit at 1:45 am ET. Next key resistance for the euro is seen around the 1.56 area.

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