Investing.com -- EUR/USD bounced off near four-month lows, spiking after Mario Draghi sent strong indications that the European Central Bank could be ready to use a wide array of easing tools in the coming months to bolster the economy following Thursday's decision to hold interest rates steady.
The currency pair rose to a session-high of 1.1060 as Draghi spoke at a news conference in Frankfurt, before falling back slightly to 1.1028 at the close of U.S. afternoon trading, up 0.0012 or 0.12% on the session. Despite the slight gains, the euro is still down by more than 3% versus the U.S. Dollar since last month's historic Brexit referendum. Over the last month, EUR/USD has remained in range-bound trade between 1.09 and 1.12, amid a relative lack of data on the long-term ramifications of the U.K.'s decision to leave the European Union.
EUR/USD likely gained support at 1.0909 the low from June 24 and was met with resistance at 1.1166, the high from July 14.
On Thursday, the ECB's Governing Council left its benchmark interest rate, as well as the pace and duration of its Quantitative Easing program unchanged until it receives more clarity on the implications of Brexit on the euro area economy as a whole. While acknowledging that the U.K.'s decision has provided headwinds to the euro zone's economic outlook, Draghi stressed that the Governing Council could move as soon as September if actions are needed to stimulate the economy.
"If warranted to achieve its objective, the Governing Council will act by using all instruments available within its mandate," Draghi said. "I would stress readiness, willingness (and the) ability to do so."
Draghi also downplayed forecasts that the U.K.'s departure could shave off as much as 0.5% in annual GDP growth throughout the euro area, noting that the duration and outcome of negotiations between the parties could take years to settle. The head of the ECB also remarked that financial markets showed "encouraging resilience," during the Post-Brexit period, crediting central bank liquidity and the swap lines they created for helping ensure stability.
The Governing Council's latest rate decision came days before the Federal Open Market Committee (FOMC) meets in Washington next week for its two-day July meeting. As the U.S. labor and housing markets have shown signs of improvement in recent weeks, FOMC participants have appeared split on the timing of its next interest rate hike. The Federal Reserve has held its benchmark interest rate steady at each of its first four meetings this year since raising short-term rates 25 basis points last December.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.25% to an intraday low of 96.77 before rising slightly to 96.94 on Thursday evening. Earlier this week, the index surged above 97 for the first time in four months while reaching its highest level since March 10.
Yields on the U.S. 10-Year fell two basis points to 1.56%. Yields on 10-year U.S. Treasuries are down by more than 75 basis points over the last year.