News Column

Euro Falls As ECB Draghi Hints At Action Next Time

May 8, 2014

CANBERA (Alliance News) - The euro gave up early gains against other major currencies, and declined in the New York deals on Thursday as the European Central Bank President Mario Draghi said the the bank will act in June meeting to combat low inflation, and reiterated warning on an overly valued currency and its impact on low inflation.

In his press conference in Brussels post ECB meet, Draghi told that he expects prolonged period of low inflation in the coming months. The risks surrounding the economic outlook for the euro area continue to be on the downside.

The ECB chief vowed to maintain a high degree of monetary accommodation and act swiftly, if required, with further monetary policy easing.

"The Governing Council is unanimous in its commitment to using also unconventional instruments within its mandate in order to cope effectively with risks of a too prolonged period of low inflation," he added.

During the Q&A session, Draghi said that he is waiting for ECB staff inflation projections which will be available at the beginning of next month, before any decision is made.

The European Central Bank today decided to maintain the main refinancing rate unchanged at a record low 0.25%. The decision was in line with economists' expectations.

The euro eased to a 2-day low of 1.3896 against the greenback, from a 2-1/2-year high of 1.3994 hit at 8:45 am ET. Further bearish trend may lead the euro to a support at the 1.38 zone. At Wednesday's close, the pair was worth 1.3911.

The euro slipped to 141.34 against the yen, reversing from a 6-day high of 142.37 hit a short while ago. Next key support level for the euro is seen around the 140.00 area.

Moving away from a recent 9-day high of 0.8249 against the pound, the euro fell back to 0.8198 shortly upon Draghi's comments. The next possible downside target for the euro is seen around the 0.81 mark.

The Bank of England decided to retain the interest rate at a historic-low of 0.50% and quantitative easing program at GBP 375 billion.

The decision was widely expected by economists.

The 18-nation currency consolidated against the franc, after falling to 1.2174 at 8:10 am ET. The pair ended Wednesday's deals at 1.2191. If the euro continues slide, it may eye support at the 1.21 level.

The euro pulled back from an early 8-day high of 1.6180 against the NZ dollar, slipping to 1.6043. The euro may test support at the 1.59 region.

The single currency declined to an 8-day low of 1.5094 against the loonie, off its previous 2-day high of 1.5237. Continuation of downtrend may see the euro finding support around the 1.50 zone

The euro fell back to a fresh 2-week low of 1.4785 against the aussie, retreating from an early Asian session's high of 1.4928. The euro is likely to target support around the 1.46 level.

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Source: Alliance News

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