Euro Dips As ECB Unveils New Stimulus Package To Revive Economy

Trading 12 sept 2019 Donner votre avis

The euro fell sharply against its major counterparts in the European session on Thursday, trimming its recent gains, after the European Central Bank introduced a package of stimulus measures, including a deposit rate cut and restart of QE program to boost the euro area economy.

The central bank slashed the deposit rate by 10 basis points to -0.50 percent, while it left the main refinancing rate and the marginal lending rate unchanged at 0.00 percent and 0.25 percent, respectively.

The bank also significantly changed the wording of its forward guidance and said "The Governing Council now 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 ECB said it would make monthly asset purchases of EUR 20 billion from November 1.

The new APP will "run for as long as necessary to reinforce the accommodative impact of its policy rates, and to end shortly before it starts raising the key ECB interest rates," the ECB added.

The bank will continue to reinvest the proceeds from maturing securities purchased under the APP for an extended period of time past the date when the Governing Council starts raising the key ECB interest rates, and in any case for as long as necessary to maintain favorable liquidity conditions and an ample degree of monetary accommodation.

Preliminary figures from Eurostat showed that Eurozone's industrial production continued to decline in July, albeit at a slower pace compared to the previous month.

Industrial production dropped 2 percent year-on-year following a 2.4 percent slump in June, which was revised from 2.6 percent. Economists had forecast a 1.3 percent decrease.

Final data from Destatis showed that Germany's inflation eased as estimated in August.

Consumer prices climbed 1.4 percent year-on-year in August, slower than the 1.7 percent increase in July.

The euro showed mixed trading against its major counterparts in the Asian session. While it rose against the yen and the franc, it was steady against the greenback and the pound.

The euro depreciated 1 percent to a 3-day low of 118.13 versus the yen, from over a 4-week high of 119.32 hit at 7:45 am ET. The pair had closed Wednesday's deals at 118.71. The euro is seen finding support around the 113.00 mark.

Data from the Bank of Japan showed that Japan producer prices fell 0.3 percent on month in August - shy of expectations for a drop of 0.2 percent following the flat reading in July.

On a yearly basis, producer prices sank 0.9 percent - again missing estimates for a fall of 0.8 percent following the 0.6 percent decline in the previous month.

After rising to a weekly high of 1.1068 against the greenback at 7:45 am ET, the euro pulled back immediately, touching a 9-day low of 1.0955. The pair was worth 1.1010 when it closed deals on Wednesday. Next key support for the euro is likely seen around the 1.07 level.

Reversing from a 2-day peak of 0.8972 recorded at 7:45 am ET, the euro dropped 0.9 percent to near a 3-month low of 0.8891 against the pound. The euro-pound pair had ended yesterday's trading session at 0.8929. The euro is likely to challenge support around the 0.86 region, if it drops again.

Survey data from the Royal Institution of Chartered Surveyors showed that UK property sales are expected to fall over the next three months as Brexit uncertainty continues to drag sentiment.

The index for expected sales volume for the coming three months declined to -23 in August from -4 in July. The house price balance rose to -4 from -9.

The euro was 0.6 percent lower at a 3-day low of 1.0890 against the franc, after having risen to 1.0952 at 7:45 am ET. At Wednesday's close, the pair was worth 1.0931. Should the euro falls further, it is likely to face support around the 1.06 region.

The European currency edged down to 1.4453 against the loonie, marking a 1 percent fall from a 6-day high of 1.4594 seen at 7:45 am ET. The euro was trading at 1.4526 against the loonie at yesterday's close. Further downtrend may take the euro to a support around the 1.42 area.

The euro fell to 1.5926 against the aussie for the first time since July 25. This was down by 1 percent from a high of 1.6087 it recorded at 7:45 am ET. The euro-aussie pair had finished deals at 1.6043 on Wednesday. The euro is poised to challenge support around the 1.57 mark.

The euro slid almost 1 percent to more than a 5-week low of 1.7017 against the kiwi, following an advance to 1.7200 at 7:45 am ET. At yesterday's trading close, the pair was quoted at 1.7168. Continuation of the euro's downtrend may lead it to a support around the 1.64 region.

Data from Statistics New Zealand showed that New Zealand food prices rose a seasonally adjusted 0.4 percent on month in August. Unadjusted, prices were up 0.7 percent on month.

Looking ahead, U.S. monthly budget statement for August is scheduled for release at 2:00 pm ET.


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