For the 24 hours to 23:00 GMT, EUR declined 0.27% against the USD and closed at 1.3865, after the ECB President, Mario Draghi hinted that the central bank’s forward guidance on interest rate might depreciate the Euro and lower real interest rates as well, thereby alleviating risks that the inflation would not return to the goal set by policy makers. He further mentioned that the central bank is looking for additional non-standard monetary-policy measures to guard against” the risk of deflation. However, the ECB Governing Council member, Jens Weidmann opined that the central bank should not react to daily changes in exchange rates, reiterating that the level of the Euro should not be a policy target for the ECB.
Separately, an ECB policymaker, Benoit Coeure indicated the central bank stands prepared to act if its forward guidance on interest rate fails to trigger a fall in the real interest rate for borrowers. Meanwhile, in a speech at Amsterdam, another ECB Governing Council member, Klaas Knot stated that a further reduction in the region’s benchmark interest rate remains an option with the central bank, should inflation rate further decline in the Euro-bloc. Nevertheless, he also indicated that the policymakers did not see the need for further unconventional measures at present as they consider “inflationary risks currently to be very limited.”
On the economic front, the ECB, in its monthly report, reiterated that interest rates in the region would remain low for an extended period of time and projected a moderate pace of economic recovery in the Euro-bloc. The report also indicated that persistent weakness in the economy, high degree of unutilised capacity and weakness in money and credit creation has lead to a subdued outlook for inflation in the economy. Separately, data from France showed that the final EU normalised consumer price index in the nation rose above analysts’ estimates in February while Italy’s consumer inflation came in-line with market expectations for February.
Meanwhile, the greenback advanced after data showed that retail sales in the US rose more-than-expected 0.3% (MoM) in February and after initial jobless claims in the nation unexpectedly declined last week.
In the Asian session, at GMT0400, the pair is trading at 1.3863, with the EUR trading tad lower from yesterday’s close.
The pair is expected to find support at 1.3815, and a fall through could take it to the next support level of 1.3768. The pair is expected to find its first resistance at 1.3939, and a rise through could take it to the next resistance level of 1.4016.
Market participants are expected to keep a close tab on Germany’s consumer inflation data and Euro-zone’s construction and employment change data for further cues in the Euro.