Euro Declines As ECB President Draghi Cautions Over Soft Indicators

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The euro dropped against its major opponents in the New York session on Thursday, erased its recent gains, after the European Central Bank President Mario Draghi acknowledged recent signs of moderation in bloc’s economic growth, with some countries experiencing a loss of momentum.

There has been some moderation in the pace of growth since the start of the year, partly reflecting a pull-back from the high pace of growth observed at the end of last year, Draghi said at his customary press conference in Frankfurt.

Recent data suggest that the euro area’s economic momentum have experienced a pull-back from robust expansion seen in previous quarters. However, overall growth is expected to remain solid and broad-based, he said.

Draghi said that the policy makers will continue to monitor developments in the exchange rate and other financial conditions with regard to their possible impact on their inflation outlook.

Although the risks related the euro area growth outlook remain broadly balanced, risks arising from global factors, which includes the threat of increased protectionism, have become more prominent, Draghi cautioned.

The Governing Council continues to expect the inflation to rise gradually over the medium term, driven by monetary policy measures, the continuing economic expansion, the corresponding absorption of economic slack and rising wage growth.

During the policy session in Frankfurt, the ECB left the key interest rates unchanged and pledged to maintain its EUR 30 billion a month buying bond program until the end of September.

The main refi rate is currently at a record low zero percent and the deposit rate at -0.40 percent. The marginal lending facility rate is 0.25 percent.

The currency was higher against its major rivals in the European session, with the exception of the pound.

The euro dropped to a 3-1/2-month low of 1.2116 against the greenback, from a high of 1.2210 hit at 8:40 am ET. At Wednesday’s close, the pair was worth 1.2160. The euro is poised to challenge support around the 1.19 mark.

Data from the Labor Department showed that first-time claims for U.S. unemployment benefits fell to their lowest level in nearly five decades in the week ended April 21.

The report said initial jobless claims dropped to 209,000, a decrease of 24,000 from the previous week’s revised level of 233,000.

The euro reversed from an early high of 133.26 against the yen, falling to a 3-day low of 132.41. The pair was worth 133.07 when it closed deals on Wednesday. The euro is seen challenging support around the 131.00 area.

Having climbed to 0.8751 against the pound at 5:00 am ET, the euro pulled back to hit an 8-day low of 0.8681. At yesterday’s close, the pair was worth 0.8729. Next key support for the euro is likely seen around the 0.86 level.

Data from the Confederation of British Industry showed that British retailers expect retail sales volume to recover next month.

The retail sales balance came in at -2 percent in April compared to a healthier expectations of +16 percent.

The euro pulled back to 1.1955 against the Swiss franc, from a high of 1.1990 hit at 9:30 am ET. The euro is thus closer to break a 2-day low of 1.1952 hit at 5:00 pm ET. If the euro continues its decline, 1.18 is possibly seen as its next support level.

The euro fell to a 2-day low of 1.7139 against the kiwi, after rising to a 4-1/2-month high of 1.7257 at 2:45 am ET. The next possible support for the euro is seen around the 1.70 area.

The 19-nation currency slipped to a 6-day low of 1.5589 against the loonie, following a high of 1.5661 seen at 9:15 am ET. On the downside, 1.52 is seen as the next support level for the euro.

Retreating from an early high of 1.6110 against the aussie, the euro declined to a 2-day low of 1.6023. Continuation of the euro’s downtrend may see it challenging support around the 1.58 region.

Data from the Australian Bureau of Statistics showed that Australia’s import prices increased at a faster-than-expected pace in the three months ended March.

The import price index climbed 2.1 percent sequentially in the first quarter, following a 2.0 percent slight rise in the fourth quarter of 2017. It was the second consecutive quarterly increase.

The material has been provided by InstaForex Company – www.instaforex.com