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Euro Firms After ECB Draghi Confirms Broadly Balanced Euro Area Growth Outlook


The euro spiked up against its key counterparts in the European session on Thursday, after the European Central Bank President Mario Draghi gave a positive assessment to the economic outlook, saying that the risks to the euro area growth appears to be broadly balanced.

In his press conference following the monetary policy decision, the ECB Chief stressed that underlying inflation is likely to pick up towards the end of the year and increase gradually over the medium term, supported by the monetary policy measures, the continuing economic expansion and rising wage growth.

But uncertainties relating to rising protectionism, vulnerabilities in emerging markets, and financial market volatility have gained more prominence recently, he cautioned.

The ECB has cut its growth forecasts for this year and next due to a somewhat weaker contribution from foreign demand. For 2018 and 2019, it predicts a 2 percent and 1.8 percent growth, slightly down from previous forecasts of 2.1 percent and 1.9 percent, respectively.

The European Central Bank has left its key rates unchanged, keeping its main refi rate at a record low of zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is 0.25 percent.

"The Governing Council expects the key ECB interest rates to remain at their present levels at least through the summer of 2019, and in any case for as long as necessary to ensure the continued sustained convergence of inflation to levels that are below, but close to, 2 percent over the medium term," the ECB said in a statement.

The euro rose against its major counterparts in the Asian session, barring the franc.

The euro was 0.6 percent higher against the greenback, touching a 2-week high of 1.1695. This follows a low of 1.1609 seen at 5:00 am ET. The pair had ended Wednesday's trading at 1.1626. The euro is seen finding resistance around the 1.19 mark.

Data from the Labor Department showed a modest increase in U.S. consumer prices in the month of August.

The Labor Department said its consumer price index rose by 0.2 percent in August, matching the increase seen in July. Economists had expected prices to climb by 0.3 percent.

The euro added 1.0 percent to hit a 2-week high of 130.50 against the yen, up from a low of 129.26 touched at 8:00 pm ET. At yesterday's close, the pair was valued at 129.34. Next key resistance for the euro is seen around the 133.00 region.

Data from the Bank of Japan showed that Japan producer prices were flat on month in August.

That was beneath expectations for an increase of 0.1 percent following the downwardly revised 0.4 percent gain in July.

After falling to a 3-day low of 1.1262 against the Swiss franc at 2:15 am ET, the euro reversed direction and appreciated 0.5 percent to a 2-day high of 1.1315. The euro had finished Wednesday's trading at 1.1282 versus the franc. The euro is poised to find resistance around the 1.14 mark.

Having fallen to 0.8892 against the pound at 7:00 am ET, the euro bounced off and was trading higher at 0.8930. The pair had closed deals at 0.8909 on Wednesday. Continuation of the euro's uptrend may take it to a resistance around the 0.91 region.

Data from the Royal Institute of Chartered Surveyors showed that U.K. house price balance dropped in August largely due to the weakness in London.

The national house price balance slid to 2 percent in August from 4 percent in July.

The single currency advanced to a 2-day high of 1.5195 against the loonie, reversing from a low of 1.5102 touched at 5:00 am ET. The euro-loonie pair was quoted at 1.5107 when it ended deals on Wednesday. Further uptrend may take the euro to a resistance around the 1.53 level.

The euro bounced off to 1.6206 against the aussie and 1.7777 against the kiwi, coming off from a 6-day low of 1.6137 and a 3-day low of 1.7706, respectively hit earlier in the day. On the upside, 1.63 and 1.80 are possibly seen as the next resistance levels for the euro against the aussie and the kiwi, respectively.

Looking ahead, U.S. monthly budget is due at 2:00 pm ET.

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