The euro depreciated against its major opponents in the European session on Thursday, after the European Central Bank President Christine Lagarde said that surging Covid-19 cases and reimposition of lockdowns are challenging the bloc’s fragile economic recovery and the central bank is prepared to deliver additional stimulus at the next policy meeting in December.
Incoming information signaled that the euro area economic recovery is losing momentum more rapidly than expected, after a strong, yet partial and uneven, rebound in economic activity over the summer months, Lagarde said in a news conference in Frankfurt.
“The rise in COVID-19 cases and the associated intensification of containment measures is weighing on activity, constituting a clear deterioration in the near-term outlook,” Lagarde warned.
The central bank will recalibrate its instruments if needed in December, when the new round of economic projections are available, the ECB chief said.
The Governing Council is prepared to respond to the unfolding situation and ensure that financing conditions remain favourable to support the economic recovery and counteract the negative impact of the pandemic on the projected inflation path.
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 decision was in line with expectations.
“The Governing Council expects the key ECB interest rates to remain at their present or lower levels until it has seen the inflation outlook robustly converge to a level sufficiently close to, but below, 2% within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics,” the bank said.
The Governing Council retained the pandemic emergency purchase programme at EUR 1.35 trillion.
Survey results from European Commission showed that Eurozone economic confidence stagnated in October as weaker sentiment in the services sector and among consumers was offset by a recovery of morale in industry, retail trade and construction.
The economic confidence index held steady at 90.9 in October. The score was forecast to ease to 89.5.
During the Asian session, the currency showed mixed performance, by rising against the yen but holding steady against the greenback and the franc. Versus the pound, it dropped.
The euro weakened to 1.1675 against the greenback, its lowest level since September 29, and marked a 0.6 percent drop from Wednesday’s closing quote of 1.1746. Next key support for the euro is likely seen around the 1.14 level.
The euro shed 0.5 percent to hit more than a 3-month low of 121.90 against the yen. The pair was worth 122.53 when it ended deals on Wednesday. The euro may challenge support around the 119.00 mark.
Japan’s central bank maintained its monetary policy easing as widely expected, and cut its growth projections.
The Policy Board of the BoJ headed by Haruhiko Kuroda voted 8-1 to retain the interest rate at -0.1 percent on current accounts that financial institutions maintain at the central bank.
The euro was trading at 1.0684 against the franc, down by 0.2 percent from a high of 1.0703 registered at 9:45 pm ET. The euro is seen locating support around the 1.03 mark.
The euro edged down to 1.6582 against the aussie, from a high of 1.6686 seen at 9:15 am ET. The EUR/AUD pair was worth 1.6667 at Wednesday’s close. Further decline in the euro may test support near the 1.62 level.
Data from the Australian Bureau of Statistics showed that Australia import prices dropped 3.5 percent on quarter in the third quarter of 2020 – after slipping 1.9 percent in the previous three months.
On a yearly basis, import prices dropped 5.7 percent.
After rising to 1.7701 at 10:45 pm ET, the euro turned lower against the kiwi, with the pair trading at 1.7607. At yesterday’s trading close, the pair was quoted at 1.7693. Immediate support for the euro is likely seen near the 1.74 level.
Having advanced to a fresh 4-week high of 1.5670 at 9:15 am ET, the euro eased off to 1.5565 against the loonie. The euro was trading at 1.5648 per loonie at yesterday’s close. Extension of downward trading may see the euro finding support around the 1.54 region.
On the flip side, the euro rebounded to 0.9059 against the pound, from a 1-1/2-month low of 0.9006 set at 5:30 am ET. The euro-pound pair had finished yesterday’s trading session at 0.9047. The euro is likely to face resistance around the 0.92 region, if it gains again.
Data from the Bank of England showed that UK mortgage approvals rose to the highest level since late 2007 as the property market continued to recover from the coronavirus driven downturn.
The number of mortgage approvals increased unexpectedly to 91,454 from 85,530 in the previous month. Approvals were forecast to drop to 76,110.
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