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Euro Appreciates As ECB Lagarde Sees Significant Rebound In Economic Activity

The euro firmed against its most major opponents in the European session on Thursday, after the European Central Bank President Christine Lagarde said that recent economic indicators showed a recovery in economic activity as lockdown restrictions have been eased, although the rebound was still in its “early stages” and “uneven across sectors and jurisdictions.”

Incoming data and survey results suggest that economic activity improved significantly in May and June from its trough in April, alongside the ongoing containment of the virus and the associated easing of the lockdown measures, Lagarde said at the post-decision press conference.

But economic indicators remained well below the levels recorded before the pandemic, and the recovery is in its early stages and is uneven across sectors and jurisdictions, she said.

Considering the uncertain outlook due to the coronavirus crisis, “ample monetary stimulus remains necessary to support the economic recovery and to safeguard medium-term price stability,” Lagarde added.

“Euro area activity is expected to rebound in the third quarter as the containment measures are eased further, supported by favourable financing conditions, an expansionary fiscal stance and a resumption in global activity, although uncertainty about the overall speed and scale of the rebound remains high.”

Lagarde also noted that the ECB is ready to adjust all instruments to ensure that inflation moves towards its aim in a sustained manner, in line with its commitment to symmetry.

The ECB left the main refi rate at a record low of zero percent and the deposit rate at -0.50 percent. The marginal lending facility rate is at 0.25 percent. The decision was in line with expectations.

The Governing Council decided to retain the pandemic emergency purchase programme at EUR 1.35 billion.

Net asset purchases under the PEPP will be conducted until at least the end of June 2021. The bank said it will reinvest proceeds from maturing bonds in the scheme at least until the end of 2022.

Data from Eurostat showed that the euro area trade surplus increased sharply in May as the relaxation of coronavirus containment measures boosted both exports and imports.

The trade surplus rose to a seasonally adjusted EUR 8 billion from EUR 1.6 billion in April.

The euro showed mixed performance against its major peers in the Asian session. While it fell against the greenback and the yen, it climbed against the pound and the franc.

The euro appreciated to 1.0796 against the franc, its biggest level since June 9, and recorded a 0.3 percent rise from a low of 1.0762 set at 4:30 am ET. At Wednesday’s close, the pair was valued at 1.0776. Should the euro strengthens further, it is likely to test resistance around the 1.09 region.

The euro bounced off to 1.1425 against the greenback, up 0.4 percent from a 2-day low of 1.1378 seen at 6:00 am ET. The pair had closed Wednesday’s deals at 1.1412. Next immediate resistance for the euro is likely seen around the 1.17 level.

The euro added 0.5 percent to 122.40 against the yen, after falling to a session’s low of 121.82 at 2:15 am ET. The pair was worth 122.02 when it ended deals on Wednesday. The euro is likely to challenge resistance around the 124.00 region, if it gains again.

The euro gained 0.4 percent against the aussie, approaching a session’s high of 1.6350. The euro-aussie pair was worth 1.6283 at Wednesday’s close. Continuation of the euro’s uptrend may lead it to a resistance around the 1.66 region.

Data from the Australian Bureau of Statistics showed that the Australian economy gained 210,800 jobs in June – blowing past expectations for the addition of 112,500 jobs following the loss of 227,700 jobs in May.

The unemployment rate came in at a seasonally adjusted 7.4 percent in June – in line with forecasts and up from 7.1 percent in the previous month.

Following a 3-day drop to 1.5393 at 2:15 am ET, the euro turned higher against the loonie, with the pair trading at 1.5464. The euro was trading at 1.5415 per loonie at yesterday’s close. Further rally may take the euro to a resistance around the 1.56 area.

Having declined to a 2-day low of 1.7343 at 5:45 pm ET, the euro recovered to 1.7445 against the kiwi. At yesterday’s trading close, the pair was quoted at 1.7360. The euro may locate resistance around the 1.80 mark.

Data from Statistics New Zealand showed that New Zealand consumer prices fell 0.5 percent on quarter in the second quarter of 2020 – in line with expectations following the 0.8 percent increase in the three months prior.

Seasonally adjusted, prices fell 0.4 percent on quarter.

On the flip side, the euro held steady against the pound, after reaching as high as 0.9095 at 7:15 am ET. The euro-pound pair had finished yesterday’s trading session at 0.9065.

Data from the Office for National Statistics showed that the UK unemployment remained unchanged in three months to May.

In three months to May, the jobless rate was largely unchanged at 3.9 percent, well below economists’ forecast of 4.2 percent.

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