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Euro Declines As Lagarde Cautions On Manufacturing Weakness In Euro Area

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The euro lost ground against its major trading partners in the European session on Thursday, after European Central President Christine Lagarde struck a cautious tone on the euro area economy, saying that inflation remained subdued and the weakness in the manufacturing sector posed a drag on growth momentum.

In her press conference in Frankfurt, Lagarde said that recent data were in line with the baseline scenario of ongoing, but moderate, growth of the euro area economy. The weakness in the manufacturing sector remained a drag on euro area growth momentum.

Considering subdued inflation outlook, monetary policy would remain highly accommodative for a prolonged period of time to support underlying inflation pressures and headline inflation developments over the medium term, Lagarde told.

The risks surrounding the euro area growth outlook, related to geopolitical factors, rising protectionism and vulnerabilities in emerging markets, remained tilted to the downside, although they have become less pronounced as some of the uncertainty surrounding international trade is receding, she added.

The ECB retained the main refinancing rate at its record low 0 percent and the deposit rate at -0.50 percent after the latest Governing Council meeting.

The marginal lending facility rate was kept unchanged at 0.25 percent.

The bank also retained its forward guidance on both interest rates and asset purchases.

The euro exhibited mixed performance against its major counterparts in the Asian session. While it held steady against the pound and the franc, it fell against the yen and the greenback.

The euro was down by 0.4 percent at a 1-1/2-month low of 1.1065 against the greenback, pulling away from a 2-day high of 1.1109 set at 8:30 am ET. At Wednesday's close, the pair was worth 1.1093. The euro is seen facing support around the 1.08 region.

Extending early slide, the euro slipped 0.6 percent to a 2-week low of 121.12 against the yen. The pair was quoted at 121.84 at Wednesday's close. Next immediate support for the euro is seen around the 118.00 level.

Data from the Ministry of Economy, Trade and Industry showed that Japan's all industry activity rose in November after falling in the previous month.

The all industry activity index rose 0.9 percent month-on-month in November, after a 4.8 percent fall in October. In September, industry activity increased 1.9 percent. Economists had expected a 0.4 percent rise for November.

The euro declined to 1.0710 against the franc, its lowest since April 2017. The pair had closed Wednesday's deals at 1.0737. Should the euro falls further, it is likely to test support around the 1.04 region.

The single currency was 0.2 percent lower at 0.8436 versus the pound, easing off from a high of 0.8457 it recorded at 8:30 am ET. The euro-pound pair had ended yesterday's trading session at 0.8441. The euro is likely to challenge support around the 0.83 level.

The EUR/CAD pair lost 0.4 percent to 1.4554, following an advance to over a 3-week high of 1.4614 at 8:30 am ET. The euro was trading at 1.4571 a loonie at yesterday's close. Further decline in the euro may face support around the 1.44 area.

Having climbed to a 1-week high of 1.6840 against the kiwi at 7:15 pm ET, the euro reversed direction, falling to a 6-day low of 1.6748. At yesterday's trading close, the pair was quoted at 1.6826. The euro may face support around the 1.66 region, if it falls again.

The euro depreciated to a 3-day low of 1.6119 against the aussie, reversing from a high of 1.6224 set at 7:15 pm ET. The euro-aussie pair was worth 1.6207 at Wednesday's close. Continuation of the euro's downtrend may lead it to a support around the 1.60 region.

Data from the Australian Bureau of Statistics showed that Australia jobless rate came in at a seasonally adjusted 5.1 percent in December.

That beat forecasts for 5.2 percent, which would have been unchanged from the November reading.

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