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Forex - EUR/USD shoots up as ECB leaves interest rates unchanged

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Shutterstock photo - The euro strengthened against the U.S. dollar on Thursday after the European Central Bank left benchmark interest rates unchanged at 0.75%.

ECB President Mario Draghi told reporters after the bank published its decision that while monetary authorities discussed the possibility of trimming borrowing costs, the "prevailing consensus" was to leave interest rates unchanged.

In U.S. trading on Thursday, EUR/USD was up 1.00% at 1.3097, up from a session low of 1.2966 and off from a high of 1.3116.

The pair was likely to find support at 1.2966, the earlier low, and resistance at 1.3162, the high from Feb. 27.

Draghi added that inflation expectations remain within comfort zones, and added that while the economy was battling headwinds in the early part of 2013, recovery should still become evident towards the end of the year.

Confidence, meanwhile, is returning to crisis-weary European markets, Draghi added.

The ECB tweaked economic forecasts for 2013, predicting the eurozone's gross domestic product to contract by between 0.1% and 0.9%, compared to a previous forecast calling for growth of between 0.3% and a contraction of 0.9%.

The euro firmed as the decision put to rest recent talk the ECB was prepared to loosen policy.

Actions from other central banks moved the pair as well.

The Bank of England earlier decided to leave interest rates unchanged at 0.5% and made no changes to the size of its GBP375 billion asset-purchasing program.

The Bank of Japan, meanwhile, made no changes to interest rates or to its JPY76 trillion asset purchasing-program at Governor Masaaki Shirakawa's final meeting before incoming governor Haruhiko Kuroda takes over next month.

Improving jobless figures in the U.S. enticed investors out of the safety of the greenback as well and added to the risk-on trading sentiment.

The U.S. Department of Labor said earlier that the number of individuals filing for initial jobless benefits fell by 7,000 to 340,000 last week, defying expectations for an increase of 8,000 to 355,000.

Separate government data revealed that the U.S. trade deficit widened to USD44.5 billion in January from a deficit of USD38.1 billion the previous month.

The euro, meanwhile, was up against the pound and up against the yen, with EUR/GBP trading up 0.81% at 0.8707, and EUR/JPY trading up 1.98% at 124.39.

On Friday, the U.S. government will release its February nonfarm payrolls data and the unemployment rate, much-anticipated economic data.

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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.

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