Euro Advances As Lagarde Sees Growth Exceeding Pre-pandemic Level By Year End

euro march12 28oct21 lt

The euro spiked higher against its major trading partners in the European session on Thursday, after the European Central Bank chief Christine Lagarde struck an optimistic note on the economy, saying that the growth could accelerate above the pre-pandemic level by the end of the year.

At her press conference in Frankfurt, Lagarde said that the euro area economy continues to recover strongly, albeit at a more moderate pace.

Inflation is likely to rise further this year, driven by rising energy prices, demand growth and supply constraints. Although the current phase of higher inflation would last longer than originally expected, the Governing Council expects it to decline in the course of next year.

The financing conditions for the economy remain favourable and the risks to the economic outlook is seen broadly balanced, Lagarde added.

The European Central Bank kept its key interest rates unchanged and confirmed that it would conduct emergency bond purchases at a moderate slower pace despite a spike in inflation.

The Governing Council maintained 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 Governing Council retained the pandemic emergency purchase programme at EUR 1.85 trillion and it is expected to run until end of March 2022.

Data from the European Commission showed that Eurozone economic confidence advanced unexpectedly in October.

The economic confidence index rose to a three-month high of 118.6 in October from 117.8 in the previous month. The reading was forecast to rise to 116.9.

The euro showed mixed trading against its major counterparts in the Asian session. While it declined against the yen and the franc, it held steady against the greenback and the pound.

The euro approached a 3-day high of 1.1638 against the dollar, climbing 0.5 percent from a 10-day low of 1.1582 set at 5:30 am ET. The pair had closed Wednesday's deals at 1.1603. The euro is likely to face resistance around the 1.18 region, if it gains again.

The euro rebounded to 132.33 against the yen, after falling to a 2-week low of 131.56 at 8:15 am ET. The pair was worth 132.05 when it ended deals on Wednesday. Immediate resistance for the euro is likely seen around the 134.00 level.

Data from the Ministry of Economy, Trade and Industry showed that Japan retail sales fell 0.6 percent on year in September - coming in at 12.041 trillion yen.

That beat forecasts for an annual decline of 2.3 percent following the 3.2 percent yearly drop in August.

The European currency edged higher to 0.8461 against the pound, up from yesterday's close of 0.8439. The euro may challenge resistance around the 0.86 mark.

The euro gained to 1.0670 against the franc, from a 3-1/2-month low of 1.0632 it logged at 5:15 pm ET. At Wednesday's close, the pair was valued at 1.0640. The euro is seen locating resistance around the 1.08 mark.

The euro ticked up to 1.4399 against the loonie from Wednesday's closing quote of 1.4333. Should the euro strengthens further, it is likely to test resistance around the 1.46 region.

The euro touched a 2-day high of 1.5501 against the aussie, following a 7-month fall to 1.5395 at 8:15 am ET. The euro-aussie pair was worth 1.5428 at Wednesday's close. Further rally in the currency may face resistance around the 1.58 level.

Rebounding from more than a 4-year low of 1.6130 seen at 8:15 am ET, the euro moved up to 1.6224 against the kiwi. At yesterday's trading close, the pair was quoted at 1.6171. On the upside, resistance awaits near the 1.66 region.

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