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Forex - EUR/USD hits 4-month lows on ECB rate cut, Draghi remarks

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Investing.com -

Investing.com - The euro dropped to four-month lows against the U.S. dollar on Thursday, after the European Central Bank lowered its benchmark interest rate by 0.10% and announced a fresh round of refinancing operations.

EUR/USD hit 1.3504 during European afternoon trade, the pair's lowest since February 6; the pair subsequently consolidated at 1.3519, retreating 0.59%.

The pair was likely to find support at 1.3478, the low of February 3 and resistance at 1.3643.

The single currency came under broad selling pressure after the ECB lowered its benchmark interest rate to a record-low 0.15% from 0.25%, compared to expectations for a cut to 0.1%.

The central bank also cut its marginal lending to 0.40% from 0.75% and lowered its deposit facility rate to -0.10% from 0.0%.

At the ECB's monthly press conference, President Mario Draghi said the rate decision would contribute to bringing inflation rates closer to the centrak bank's target of just below 2% and that the bank is determined to safeguard this anchoring.

Draghi added that key ECB rates will remain at present levels for an extended period of time, but that the bank is prepared to act swiftly with further monetary easing in case of a prolonged period of low inflation.

To support bank lending, Mario Draghi said the ECB will be conducting a series of targeted longer term refinancing operations (TLTROs), all of which will mature in September 2018. Two successive TLTROs are scheduled to be launched in September and December 2014, he added.

In the U.S., the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending May 31 increased by 8,000 to 312,000 from the previous week's revised total of 304,000.

Analysts had expected jobless claims to rise by 6,000 to 310,000 last week.

The euro was also lower against the pound, with EUR/GBP declining 0.68% to 0.8069.

In a widely expected move, the Bank of England's Monetary Policy Committee earlier voted to keep interest rates on hold at their current record low of 0.5%. The bank also made no change in its quantitative easing program, which remains at £375 billion.

Expectations for a U.K. rate hike in the early part of next year have recently propelled sterling to multi-year highs against the dollar, after a string of strong economic reports indicated that the recovery is deepening.

The decision came after data showed that U.K. house prices rose by 3.9% last month, exceeding expectations for a 0.7% gain, after a 0.3% fall in April, whose figure was revised from a previously estimated 0.2% slip.

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


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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