Euro Weakens After ECB Maintains Rates, Forward Guidance

The euro was lower against its most major opponents in the European session on Thursday, after the European Central Bank left its interest rates and stimulus measures unchanged, after cutting deposit rate and restarting its quantitative easing programme last month.

The main refinancing rate was retained at its record low 0 percent and the deposit rate at -0.50 percent after the latest Governing Council meeting.

The marginal lending facility rate was kept unchanged at 0.25 percent.

The bank also retained its forward guidance on both interest rates and asset purchases.

“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 percent within its projection horizon, and such convergence has been consistently reflected in underlying inflation dynamics,” the bank said.

The ECB said it would restart its asset purchase programme at a monthly pace of EUR 20 billion from November 1.

Soft manufacturing PMIs from Germany and Eurozone triggered a pull back in the euro earlier in the European session.

Survey data from IHS Markit showed that the euro area private sector remained close to stagnation in October as manufacturing continued to shrink amid subdued expansion in services activity.

The flash composite output index rose slightly to 50.2 in October from 50.1 in September. A score above 50 indicates expansion, and that below 50 suggests contraction. The score was forecast to improve to 50.3.

The currency held steady against its major counterparts in the Asian session.

The euro slipped to 1.1120 against the greenback, down from a 3-day high of 1.1163 hit at 3:15 am ET. The euro is seen finding support around the 1.09 region.

After rising to a 3-day high of 121.39 at 3:15 am ET, the euro pulled back to 120.80 against the yen. The next likely support for the euro is seen around the 118.00 level.

Final data from the Cabinet Office showed that Japan’s leading index fell less than estimated in August but remained at the lowest level in nearly ten years in August.

The leading index, which measures the future economic activity, fell to 91.9 in August from 93.7 in July. The initial estimate was 91.7.

The single currency depreciated to 1.1016 versus the Swiss franc, following a 1-week high of 1.1042 seen at 3:15 am ET. The euro is poised to challenge support around the 1.09 level.

Reversing from an early 2-day high of 1.4590 against the loonie, euro fell back to 1.4542. On the downside, 1.42 is possibly seen as the next support level for the euro.

The euro eased off to 1.6268 against the aussie, from a weekly high of 1.6310 it touched at 3:15 am ET. Should the euro falls further, it is likely to test support around the 1.61 region.

Survey data from IHS Markit showed that Australia’s private sector logged a weaker growth in October.

The Commonwealth Bank of Australia Flash Composite Output Index dropped to 50.7 in October from 52.0 in September. A score above 50 indicates expansion.

In contrast, the euro held steady against the kiwi, after having risen to a 3-day high of 1.7434 at 3:15 am ET. The pair had finished Wednesday’s deals at 1.7333.

After rebounding from a 2-day low of 0.8600 seen at 3:00 am ET, the euro traded steadily against the pound in subsequent deals. The pair was valued at 0.8615 when it ended trading on Wednesday.

Looking ahead, the U.S. new home sales for September will be featured at 10:00 am ET.

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