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Euro Slides As ECB Draghi Says Eurozone Growth Risks Moving To Downside


The euro nosedived against its major opponents in the European session on Thursday, after the European Central Bank President Mario Draghi delivered a cautious assessment about the bloc, saying that risks surrounding the euro area growth outlook have moved to the downside due to uncertainties stemming from geopolitical factors, the threat of protectionism and financial market volatility.

In his customary press conference, Draghi acknowledged that recent economic data has been weaker than expected, while uncertainties pertaining to geopolitical factors and the threat of protectionism weighed on economic sentiment.

Draghi asserted that significant monetary policy stimulus remained necessary for the euro area to support the further build-up of domestic price pressures and headline inflation developments over the medium term.

"This will be provided by our forward guidance on the key ECB interest rates, reinforced by the reinvestments of the sizeable stock of acquired assets," Draghi told.

Draghi cautioned that the risks surrounding the euro area growth outlook have moved to the downside, driven by persistent uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.

Following the policy session in Frankfurt, the Governing Council left the key interest rates and forward guidance unchanged.

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 at 0.25 percent.

The currency has been trading lower prior to the ECB decision, as disappointing private sector surveys from Eurozone and France pointed to slowing growth momentum across the bloc.

Survey data from IHS Markit showed that Eurozone private sector expanded at the weakest pace in five-and-a-half years at the start of the year, led by weaker pace of growth in both manufacturing and services, defying expectations for further improvement.

The flash Composite Purchasing Managers' Index, or PMI, dropped to a 66-month low of 50.7 from 51.1 in December. Economists had forecast a score of 51.4.

In France, the flash Composite Purchasing Managers' Index fell to a 50-month low of 47.9 from 48.7 in December. Economists had forecast a score of 51.

The currency held steady against its major rivals in the Asian session, with the exception of the yen.

The euro lost 0.7 percent to a 3-week low of 1.1307 against the greenback, after rising to 1.1391 at 8:30 pm ET. The pair had ended Wednesday's trading at 1.1382. The euro is seen finding support around the 1.11 level.

The euro depreciated to 0.8683 against the pound, its lowest since November 14, and marked a 0.5 percent slide from a high of 0.8725 seen at 3:00 am ET. At yesterday's close, the pair was worth 0.8707. The euro is poised to target support around the 0.84 level.

Continuing its early slide, the euro touched a weekly low of 123.98 against the yen. This was 0.7 percent down from a high of 124.90 hit at 1:00 am ET. The euro-yen pair had finished yesterday's deals at 124.73. Continuation of the euro's downtrend may take it to a support around the 122.00 level.

Survey from Nikkei showed that Japan manufacturing PMI fell into stagnation in December, with a manufacturing PMI score of 50.0.

That's down from 52.6 in December and it lands right on the line that separates expansion from contraction.

Following an uptick to 1.1327 against the Swiss franc at 8:00 pm ET, the euro pulled back and fell to an 8-day low of 1.1269. The pair was worth 1.1324 when it ended deals on Wednesday. Further downtrend may lead the euro to a support around the 1.10 mark.

Pulling away from a high of 1.6811 hit at 12:00 am ET, the euro weakened to 1.6706 against the kiwi. The euro is likely to test support around the 1.66 level, if it drops further.

The single currency depreciated to 1.5119 against the loonie, after having climbed to 1.5204 at 11:15 pm ET. On the downside, 1.49 is possibly seen as the next support level for the euro.

The euro retreated to 1.5945 against the aussie, from a 2-week high of 1.6038 touched at 1:30 am ET. The euro is thus heading to pierce a 2-day low of 1.5891 touched at 8:00 pm ET. Next key support for the euro is likely seen around the 1.57 mark.

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