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Euro Appreciates As ECB Boosts Emergency Bond Buying Scheme

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The euro spiked against its major trading partners in the European session on Thursday, after the European Central Bank kept its key interest rates unchanged and expanded the pandemic emergency purchase programme to support the economy from the impact of Covid-19.

The ECB increased the size of its emergency asset purchase programme, or PEPP, by EUR 600 billion to a total EUR 1,350 billion.

This expansion will further ease the general monetary policy stance and support funding conditions in the real economy, especially for businesses and households, the ECB said.

The Governing Council left the main refi rate at a record low of zero percent and the deposit rate at -0.50 percent. The marginal lending facility rate is at 0.25 percent. The decision was in line with expectations.

Data from Eurostat showed that Eurozone retail sales declined sharply for the second straight month in April as coronavirus containment measures weighed on consumer spending.

Retail sales decreased 11.7 percent month-on-month, following an 11.1 percent drop in March. Economists had forecast a monthly decrease of 15 percent. This was the second consecutive fall in sales volume.

The euro dropped against its most major counterparts in the Asian session on hopes that European Central Bank will increase the size of its 750 billion euro pandemic emergency purchase programme to support the coronavirus-stricken economy.

The euro appreciated to 1.1272 against the dollar, its highest level since March 12, and recorded a 0.7 percent rise from a low of 1.1195 set at 4:15 am ET. The pair had closed Wednesday's deals at 1.1233. The euro is seen finding resistance around the 1.14 mark.

The euro gained 0.4 percent against the yen, approaching a 4-1/2-month of 122.78. The pair was worth 122.33 when it ended deals on Wednesday. Next key resistance for the euro is likely seen around the 125.00 level.

The euro bounced off to 1.0803 against the franc, up 0.5 percent from a low of 1.0744 seen at 5:30 am ET. At Wednesday's close, the pair was valued at 1.0798. The euro is likely to face resistance around the 1.10 region, if it gains again.

Continuing its early rally, the euro jumped 0.4 percent to a 3-day high of 0.8969 against the pound. The euro-pound pair had finished yesterday's trading session at 0.8933. Should the euro strengthens further, it is likely to test resistance around the 0.91 region.

Survey data from IHS Markit showed that the UK construction sector downturn eased in May reflecting a gradual reopening of construction sites as lockdown measures introduced to curb the spread of coronavirus were eased in England.

The IHS Markit/Chartered Institute of Procurement & Supply construction Purchasing Managers' Index rose to 28.9 in May from 8.2 in April.

Having declined to 1.5113 at 4:30 am ET, the euro turned higher against the loonie, rising to a 3-day high of 1.5201. The euro was trading at 1.5160 per loonie at yesterday's close. Further uptrend may take the euro to a resistance around the 1.54 area.

The euro was up 0.5 percent at 1.6281 against the aussie, after falling to 1.6206 at 7:30 pm ET. The euro-aussie pair was worth 1.6231 at Wednesday's close. The euro may challenge resistance around the 1.65 mark.

Following a fall to 1.7424 at 7:15 am ET, the euro recovered against the kiwi, with the pair trading at 1.7502. At yesterday's trading close, the pair was quoted at 1.7491. Extension of the euro's uptrend may lead it to a resistance around the 1.78 region.

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