Plus   Neg

Euro Climbs As Draghi Says ECB Ready To Act More, If Adverse Contingencies Arise

eurusd 060619 lt

The euro was higher against its major counterparts in the European session on Thursday, after the European Central President Mario Draghi remarked that recent economic data had been somewhat better than expected, but the policy makers are "determined" to act if necessary, in the light of prolonged global uncertainties and the rising threat of protectionism that poses challenges to the euro area growth outlook.

In his customary post-decision press conference in Vilnius, Draghi said that economic indicators for the first quarter had exceeded estimates and rising employment and improving wage growth continue to underpin the resilience of the euro area economy and gradually rising inflation.

"Today's policy measures ensure that financial conditions will remain very favourable, supporting the euro area expansion, the ongoing build-up of domestic price pressures and, thus, headline inflation developments over the medium term," Draghi told.

The Governing Council is determined to act, if adverse contingencies happen, and is willing to adjust all its instruments to ensure inflation moving towards the Governing Council's inflation aim in a sustained manner.

Draghi, however, cautioned that the most recent information pointed that global headwinds continue to weigh on the euro area outlook.

"The risks surrounding the euro area growth outlook remain tilted to the downside, on account of the prolonged presence of uncertainties, related to geopolitical factors, the rising threat of protectionism and vulnerabilities in emerging markets," he added.

At its monetary policy meeting, the Governing Council left the interest rates on the main refinancing operations, the marginal lending facility and the deposit facility unchanged at 0.00 percent, 0.25 percent and -0.40 percent, respectively.

But the bank changed its forward guidance to reflect that it expects any change to the interest rate only after the first half of next year. Earlier, the bank expected rates to remain unchanged at least through the end of this year.

Data from Eurostat showed that the euro area economy expanded as initially estimated in the second quarter, mainly driven by household spending and investment.

Gross domestic product grew 0.4 percent sequentially, in line with the previous estimate and bigger than the 0.2 percent growth seen in the fourth quarter of 2018.

Data from Destatis showed showed that Germany's factory orders expanded at a slower pace in April on weak domestic demand.

Factory orders grew 0.3 percent month-on-month in April, weaker than the revised 0.8 percent increase seen in March. However, the latest increase was slightly faster than the expected 0.2 percent.

The currency traded mixed against its major counterparts in the Asian session. While it rose against the greenback and the pound, it held steady against the franc. Against the yen, it dropped.

The euro added 1 percent to near a 2-month high of 1.1309 against the greenback, from a 3-day low of 1.1201 touched at 7:45 am ET. The pair closed Wednesday's deals at 1.1221. The euro is seen finding resistance around the 1.15 region.

Data from the Labor Department showed that first-time claims for U.S. unemployment benefits came in unchanged in the week ended June 1.

The Labor Department said initial jobless claims came in at 218,000, unchanged from the previous week's revised level.

The euro was 0.5 percent higher at 0.8875 against the pound, following a 3-day low of 0.8828 set at 7:45 am ET. The euro-pound pair was valued at 0.8845 when it ended deals on Wednesday. Should the euro continues its uptrend, 0.90 is likely seen as its next resistance level.

Following a 3-day low of 121.22 hit quickly after the ECB announcement, the euro bounced off 0.8 percent to 122.20 against the Japanese yen. The euro finished Wednesday's trading at 121.70 against the yen. Continuation of the euro's upward trading may lead it to a resistance around the 124.00 level.

The European currency reached as high as 1.1197 against the franc, up 0.4 percent from a low of 1.1155 seen at 2:30 am ET. The euro-franc pair was worth 1.1162 at Wednesday's close. Next key resistance for the euro is seen around the 1.13 mark.

Having depreciated to a 6-day low of 1.5027 against the loonie at 7:45 am ET, the euro reversed direction, trading 0.8 percent higher at more than a 3-week high of 1.5147. The euro was trading at 1.5052 a loonie at yesterday's close. On the upside, the euro is likely to target resistance around the 1.52 mark.

The euro appreciated to a 9-day high of 1.6177 against the aussie, after a 3-day decline to 1.6072 post-ECB announcement. At yesterday's close, the pair was quoted at 1.6100. Further uptrend may see the euro challenging a resistance around the 1.63 level.

Data from the Australian Bureau of Statistics showed that Australia's trade surplus decreased slightly in April on higher imports.

The trade surplus fell unexpectedly to A$4.87 billion from A$4.88 billion in March. The surplus was forecast to increase to A$5.0 billion in April.

The euro strengthened to 1.7031 against the kiwi, reversing from more than a 4-week low of 1.6911 hit at 7:45 am ET. The euro-kiwi pair was worth 1.6956 at yesterday's New York session close. The euro is likely to test resistance around the 1.72 level, if it strengthens again.

For comments and feedback contact: editorial@rttnews.com

Market Analysis

Follow RTT