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Euro Weakens As ECB Holds Rates Steady; Reiterates Gradual Rate Hike

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The euro fell against its major rivals in the European session on Thursday, after the European Central Bank kept its key interest rates unchanged and reiterated that a rate hike would be gradual after the completion of the asset purchase programme in the third quarter.

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.

The Governing Council confirmed that net asset purchases under the APP would be concluded in the third quarter.

"Any adjustments to the key ECB interest rates will take place some time after the end of the Governing Council's net purchases under the APP and will be gradual."

The bank confirmed that the key interest rates would remain at their present levels until it sees inflation reaching two percent well ahead of the end of its projection horizon and durably for the rest of the projection horizon, and it judges that realized progress in underlying inflation is sufficiently advanced to be consistent with inflation stabilizing at two percent over the medium term.

In her press conference in Frankfurt, ECB President Christine Lagarde indicated that the downside risks to the growth outlook had increased substantially as a result of the war in Ukraine.

In the current conditions of high uncertainty, the central bank would maintain optionality, gradualism and flexibility in the conduct of monetary policy, Lagarde added.

The currency showed mixed trading against its key counterparts in the Asian session. While it rose against the greenback and the franc, it dropped against the yen and the pound.

The euro declined to 136.14 against the yen, down from a 3-day high of 136.94 seen at 2:30 am ET. The pair was worth 136.80 when it ended deals on Wednesday. Further fall in the euro may face support around the 133.00 area.

The euro fell to its lowest level since March 8 against the pound, at 0.8281. The euro-pound pair had finished yesterday's trading session at 0.8302. Next likely support for the euro is found around the 0.80 level.

After climbing to a 3-day high of 1.0923 at 2:30 am ET, the euro weakened to 1.0863 against the greenback. The pair had closed Wednesday's deals at 1.0889. Should the euro falls further, 1.06 is likely seen as its next support level.

The euro touched an 8-day low of 1.3628 against the loonie, down from yesterday's close of 1.3677. The euro is seen finding support around the 1.33 mark.

Against the kiwi, the euro was down at 1.5930. At yesterday's trading close, the pair was quoted at 1.6014. The euro may challenge support around the 1.54 area.

The euro retreated to 1.4596 against the aussie, following a 2-day high of 1.4665 hit at 7:30 am ET. The euro-aussie pair was worth 1.4611 at Wednesday's close. The currency is likely to face support around the 1.41 region, if it falls again.

Data from the Australian Bureau of Statistics showed that Australia's unemployment rate remained unchanged in March.

The jobless rate was a seasonally adjusted 4.0 percent in March, same as seen in February. Economists had forecast a rate of 3.9 percent.

The euro pulled back to 1.0154 against the franc, after a rise to a 10-day high of 1.0212 at 7:40 am ET. At Wednesday's close, the pair was valued at 1.0161. Immediate support for the euro is seen near the 0.995 level.

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