Euro Falls As ECB Signals Recalibration Of Monetary Policy Instruments In December

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The euro drifted lower against its major trading partners in the European trading session on Thursday, after minutes from the European Central Bank’s recent meeting showed that members broadly agreed that the sharper slowdown in growth momentum and the weakening of underlying inflation dynamics could warrant recalibration of the monetary policy instruments in December.

While there was wide agreement on the need to signal the necessity of recalibrating the ECB’s monetary policy instruments at the December monetary policy meeting, it was cautioned that the Governing Council should not pre-commit itself to specific policy actions, the minutes of the bank’s October 28-29 meeting showed.

Members noted that taking monetary policy decisions in December would be consistent with prevailing market expectations.

ECB policymakers, however, stressed that the Governing Council is prepared to act at any time, if needed.

“It was stressed that any sign of complacency – even inadvertent – could be detrimental in the present circumstances.”

An ambitious and coordinated fiscal stance remained critical and was the most effective policy in the current situation to deal with the effects of the pandemic and the associated containment measures, it added.

Survey results from the market research group GfK showed that German consumer sentiment deteriorated notably due to the partial lockdown.

The forward-looking consumer sentiment index fell to -6.7 in December from revised -3.2 in October. The expected reading was -5.0.

The currency climbed against its major counterparts in the Asian session, except the franc.

The euro eased 0.5 percent to 1.1885 against the greenback, after rising to near a 3-month high of 1.1941 at 2:45 am ET. The pair had closed Wednesday’s deals at 1.1912. Immediate support for the euro is likely seen around the 1.16 level.

The euro was down by 0.5 percent at a 2-day low of 123.91 against the yen, pulling back from a fresh 2-week high of 124.57 it set at 1:15 am ET. The EUR/JPY pair was worth 124.44 when it ended deals on Wednesday. Should the euro falls further, it is likely to test support around the 119.5 region.

Final data from the Cabinet Office showed that Japan’s leading index rose less than estimated in September.

The leading index, which measures the future economic activity, rose to 92.5 in September from 88.5 in August. In the initial estimate, the reading was 92.9.

The EUR/CHF pair dropped 0.1 percent, hitting a 2-day low of 1.0806. At Wednesday’s close, the pair was valued at 1.0822. Further fall in the currency may challenge support around the 1.05 level.

Having climbed to a 2-day high of 1.5519 at 3:15 am ET, the euro slipped to 1.5466 against the loonie. The euro was trading at 1.5492 a loonie at yesterday’s close. Next likely support for the euro is found around the 1.52 level.

The euro was lower at 1.6155 versus the aussie, down from a high of 1.6213 it recorded at 12:30 am ET. The euro-aussie pair was worth 1.6172 at Wednesday’s close. The euro is seen locating support around the 1.58 mark.

Data from the Australian Bureau of Statistics showed that Australia’s capital expenditure declined more than expected in the third quarter.

Total new capital expenditure decreased 3 percent sequentially in the September quarter, which was bigger than the expected decline of 1.5 percent. Nonetheless, the pace of drop eased from -6.4 percent in the second quarter.

The European currency remained weaker against the kiwi, with the pair trading at 1.7001. The euro is on track to pierce a 2-day low of 1.6981 seen at 5:15 pm ET. At yesterday’s trading close, the pair was quoted at 1.6996. Extension of downward trading may see the euro finding support around the 1.66 region.

In contrast, the euro was trading higher against the pound, at 0.8923. The euro-pound pair had finished yesterday’s trading session at 0.8897. On the upside, key resistance is seen near the 0.92 level.


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