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Euro Slides As ECB Draghi Hints At Addl. Stimulus Amid Low Inflation


The euro fell sharply Tuesday after European Central Bank President Mario Draghi said additional stimulus measures would be required if the inflationary goal is threatened against the backdrop of geopolitical factors and trade tensions.

Draghi is open to new rate cuts or asset purchases.

Speaking at the ECB Forum on Central Banking in Sintra, Portugal, Draghi said, "Further cuts in policy interest rates and mitigating measures to contain any side effects remain part of our tools."

"And the APP [asset purchase programme] still has considerable headroom."

Risks to the euro area economic outlook remained tilted to the downside and indicators for the coming quarters suggest lingering softness, Draghi said.

"In the absence of improvement, such that the sustained return of inflation to our aim is threatened, additional stimulus will be required."

Data from Eurostat showed that the Eurozone trade surplus declined to a 5-month low in April as the decline in exports exceeded the fall in imports.

The trade surplus fell to a seasonally adjusted EUR 15.3 billion in April from EUR 18.6 billion in March. This was the lowest since November 2018. Economists had forecast a surplus of EUR 16.3 billion.

Survey data from the ZEW-Leibniz Centre for European Economic Research showed that Germany's economic confidence weakened sharply to a 7-month low in June.

The economic sentiment index declined 19 points to -21.1 in June. The score was forecast to fall moderately to -5.6. This was the lowest reading since November 2018.

During the Asian session, the currency showed mixed performance, by rising against the pound and the greenback but holding steady against the yen and the franc.

The euro lost 0.5 percent to near a 2-week low of 1.1188 against the greenback, from a high of 1.1243 touched at 3:15 am ET. The pair was worth 1.1218 when it closed deals on Monday. Continuation of the euro's downtrend may lead to a support around the 1.10 region.

For the first time since June 3, the euro dropped 0.5 percent to 121.16 against the Japanese yen. The pair had closed Monday's deals at 121.74. The euro is poised to challenge support around the 118.00 mark.

The European currency touched as low as 1.1173 against the Swiss franc, its weakest level since June 7, and recorded a fall of 0.4 percent from a high of 1.1214 set at 8:00 pm ET. At Wednesday's close, the pair was worth 1.1207. Further downtrend may take the euro to a support around the 1.10 area.

Following near a 2-week high of 1.5084 recorded at 3:15 am ET, the euro pulled back against the loonie, falling 0.5 percent to a 4-day low of 1.5012. The euro was trading at 1.5046 against the loonie at yesterday's close. Should the euro falls further, it is likely to face support around the 1.48 region.

Having climbed to a 5-1/2-month high of 1.6448 against the aussie at 3:15 am ET, the euro eased off to 1.6341 following Draghi's remarks. The euro-aussie pair had finished deals at 1.6370 on Monday. The euro is seen finding support around the 1.60 mark.

The minutes from the Reserve Bank of Australia's June meeting showed that policymakers suggested that it was more likely than not that a further easing in monetary policy would be appropriate in the period ahead.

Members said developments in the labor market would be particularly important, in assessing whether more easing was appropriate.

The euro was 0.8 percent lower at a 4-day low of 1.7177 against the kiwi, after spiking higher to near an 8-month high of 1.7307 at 3:15 am ET. At yesterday's trading close, the pair was quoted at 1.7274. The euro is likely to challenge support around the 1.70 region, if it drops again.

Survey data from Westpac showed that New Zealand's consumer sentiment weakened slightly in the second quarter as households remained downbeat about the economic backdrop.

The Westpac McDermott Miller consumer confidence index dropped 0.3 points to 103.5 in June.

The single currency depreciated to 0.8922 against the pound, down by 0.6 percent from more than a 5-month high of 0.8974 marked at 9:45 pm ET. The euro-pound pair had ended yesterday's trading session at 0.8950. Next key support for the euro is likely seen around the 0.88 level.

Looking ahead, U.S. housing starts and building permits for May, as well as Canada manufacturing sales for April will be out in the New York session.

At 10:00 am ET, Bank of England Governor Mark Carney along with ECB's Draghi will speak in a policy panel at the ECB Forum on Central Banking in Sintra.

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