Forex - EUR/USD plummets on ECB stimulus move, U.S. service-sector data

Shutterstock photo
Shutterstock photo

Shutterstock photo - - The euro dropped to 13-month lows against the dollar on Thursday after the European Central Bank moved to loosen monetary policy with rate cuts and stimulus programs, while an upbeat U.S. service-sector report added to the greenback's gains.

In U.S. trading, EUR/USD was down 1.70% at 1.2925, up from a session low of 1.2920 and off a high of 1.3154.

The pair was likely to find support at 1.2754, the low from July 9, 2013, and resistance at 1.3160, Wednesday's high.

The European Central Bank earlier trimmed its benchmark interest rate to a record-low 0.05% from 0.15%, surprising many market analysts who had expected no change.

The central bank also lowered its deposit facility rate to -0.20% from -0.10% previously and its marginal lending rate to 0.30% from 0.40%.

The euro extended losses after ECB President Mario Draghi said the bank will begin an asset-backed securities purchasing program to shore up the recovery and steer the continent away from deflationary decline.

Draghi did not say how much debt the ECB planned to purchase, as further details will emerge in October.

The ECB cut its forecast for growth this year to 0.9% down from 1.0% previously and cut the forecast for 2015 to 1.6% from 1.7%. The bank also lowered its inflation forecast for this year to 0.6% from 0.7% in June.

Meanwhile in the U.S., the Labor Department reported that the number of individuals filing for first-time unemployment assistance in the U.S. last week rose by 4,000 to 302,000 from the previous week's total of 298,000.

Analysts had expected jobless claims to rise by 2,000 to 300,000 last week.

Elsewhere, payroll processor ADP reported that its nonfarm payrolls report showed that the private sector added 204,000 jobs in August, missing expectations for jobs growth of 220,000.

At the same time data showed that the U.S. trade deficit narrowed to the lowest in six months in July.

Elsewhere, the euro was down against the pound, with EUR/GBP down 1.03% at 0.7906, and down against the yen, with EUR/JPY down 1.29% at 136.08.

On Friday, investors will shift their focus from Europe across the Atlantic to the U.S., which will release its August jobs report.

Expect the pair to track euro area gross domestic product data as well.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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