Euro Advances As ECB Sounds Optimistic Over Growth Momentum
The euro climbed against its major opponents in early European deals on Thursday, after the European Central Bank indicated that the economic expansion continues to be solid across the bloc, with indicators confirming the outlook for robust growth momentum in the near term.
In its economic bulletin, the ECB said it expects the ongoing euro area economic expansion to continue, helped by the bank's monetary policy measures, which are being passed through to the real economy.
"Measures of underlying inflation have ticked up slightly in recent months but, overall, remain at subdued levels. Therefore, a very substantial degree of monetary accommodation is still needed for underlying inflation pressures to gradually build up and support headline inflation developments in the medium term," it added.
Rapid decline in unemployment is noteworthy against a background of increasing labour supply. Nevertheless, broader measures of unemployment suggest that slack is still elevated in many euro area labour markets, it said.
The bank said that the volatility in the exchange rate of the euro is a source of uncertainty, as it would have implications on the medium-term outlook for price stability.
The currency was also supported by risk appetite, as bond yields rose following resolutely hawkish signals from the U.S. Federal Reserve and media reports of a possible merger of Commerzbank with Italy's UniCredit helped fuel a rally in banks.
The currency showed mixed performance in the Asian session. While it fell against the greenback and the pound, it rose against the yen and the Swiss franc.
The euro climbed to 1.1919 against the greenback, after having fallen to 1.1866 at 7:45 pm ET. If the euro extends rise, 1.23 is possibly seen as its next resistance level.
The single currency remained firm against the Japanese yen with the pair trading at 133.94, following a decline to 133.42 at 5:45 pm ET. The next likely resistance for the euro-yen pair is seen around the 136.00 area.
The Bank of Japan maintained its monetary stimulus but a new member voted against the decision, demanding more easing.
The BoJ policy board, led by Governor Haruhiko Kuroda, voted 8-1 to hold the central bank's target of raising the amount of outstanding Japan government bond holdings at an annual pace of about JPY 80 trillion.
The 19-nation currency spiked up to 1.1587 against the Swiss franc, a level unseen since January 2015. On the upside, 1.17 is possibly seen as the next resistance level for the euro-franc pair.
Data from the Federal Customs Administration showed that Switzerland's foreign trade surplus decreased in August, as imports grew faster than exports.
The trade surplus shrank to CHF 2.2 billion in August from CHF 3.5 billion in July.
The common currency reversed from an early low of 0.8797 against the pound, rising to 0.8834. The euro is poised to target 0.89 as the next resistance level.
Data from the Office for National Statistics showed that the UK budget deficit decreased to its lowest August level since 2007.
Public sector net borrowing excluding interventions decreased by GBP 1.3 billion to GBP 5.7 billion in August. This was the lowest August borrowing since 2007.
The euro advanced to 1.4713 against the loonie, 1.4986 against the aussie and 1.6284 against the kiwi, off its early low of 1.4645, 5-week low of 1.4792 and more than a 4-week low of 1.6139, respectively. Continuation of the euro's uptrend may see it challenging resistance around 1.48 against the loonie, 1.51 against the aussie and 1.64 against the kiwi.
Looking ahead, Canada wholesale sales for July, Eurozone flash consumer sentiment for September, U.S. weekly jobless claims for the week ended September 16, house price index for July and leading indicators for August are set for release in the New York session.
At 9:30 am ET, the European Central Bank President Mario Draghi speaks at the European Systemic Risk Board annual conference, in Frankfurt.