Euro Lower As ECB Hints At Rate Cut Ahead

(RTTNews) - The euro weakened against its major counterparts in the New York session on Thursday, as the European Central Bank left its key interest rates unchanged but signaled a possible cut at the next meeting in June amid a drop in inflation and anaemic growth.

The Governing Council left the main refinancing rate, or refi, unchanged at 4.50 percent, as expected.

The deposit facility rate was held steady a record high 4.00 percent and the lending rate was retained at 4.75 percent.

Policymakers consider that the key interest rates are at levels that are making a substantial contribution to the ongoing disinflation process, the ECB said.

Future decisions will ensure that its policy rates will stay sufficiently restrictive for as long as necessary, the bank added.

"If the Governing Council's updated assessment of the inflation outlook, the dynamics of underlying inflation and the strength of monetary policy transmission were to further increase its confidence that inflation is converging to the target in a sustained manner, it would be appropriate to reduce the current level of monetary policy restriction," the ECB said.

During the press conference, Christine Lagarde said that the ECB is "data dependent" and not "Fed dependent."

"We're not going to wait until everything goes back to 2% to make the decisions that will be necessary."

The euro fell to near a 2-month low of 1.0699 against the greenback and a 6-day low of 1.4666 against the loonie, from yesterday's closing values of 1.0742 and 1.4695, respectively. The euro is likely to face support around 1.05 against the greenback and 1.44 against the loonie.

The euro weakened to a 6-day low of 0.9747 against the franc and a 9-day low of 0.8542 against the pound, from Wednesday's close of 0.9806 and 0.8566, respectively. The euro is seen finding support around 0.95 against the franc and 0.84 against the pound.

The euro dropped to 1.7864 against the kiwi and 1.6397 against the aussie, from Wednesday's closing quotes of 1.7976 and 1.6493, respectively. The euro may face support around 1.74 against the kiwi and 1.61 against the aussie. The euro declined to 163.94 against the yen from yesterday's close of 164.52. Should the euro falls further, it is likely to test support around the 161.00 region.