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Euro Falls Against Majors

The euro declined against its major rivals in European deals on Thursday, due to divergence of monetary policy of the European Central Bank with that of other major central banks.

The Federal Reserve on Wednesday backed away from its pledge to be “patient” Wednesday, a strong signal that the central bank will hike interest rates in July or September.

The Fed said a rate hike in April is unlikely and although Fed Chair Janet Yellen said a June rate hike cannot be ruled out, a slight downgrade in the economic outlook means that tightening may pushed out until the second half of the year.

By contrast, the European Central Bank’s €1.1 trillion stimulus programme launched last week has crushed the euro and bond yields lower. The central bank is too far from the possibility of a policy tightening, given its QE program is set to run till September 2016.

Concerns over Greece bailout aid also weighed on the euro, as the European leaders are yet to unlock last tranche of EUR 240 billion bailout aid to Greece. Greece is facing stiff opposition from its European partners, especially Germany, for funding assistance, as it has not pushed through economic reforms demanded by EU.

Greek Prime Minister Alexis Tsipras is due to hold talks with EU leaders at a European Union summit in Brussels starting today. Tsipras is seeking a meeting with German Chancellor Angela Merkel, European Central Bank President Mario Draghi, French President Francois Hollande and European Commission head Jean-Claude Juncker to discuss a political solution to the crisis.

Greece has to pay EUR 300 million to International Monetary Fund and redeem EUR 1.6 billion in treasury bills by Friday.

In economic front, Eurozone labor costs growth slowed for the second consecutive quarter in the three months to December 2014, figures from Eurostat revealed.

The nominal hourly labor costs grew a working-day adjusted 1.1 percent year-on-year following 1.4 percent gain in the third quarter. In the three months to June, labor costs had risen 1.5 percent.

The euro slipped to a 2-day low of 0.7162 against the Sterling, down by 1.5 percent from an early high of 0.7275. If the euro extends decline, 0.70 is seen as its next support level.

The euro pared gains to 128.40 against the yen and 1.0630 against the greenback, from previous highs of 130.83 and 1.0918, respectively. The next possible support for the euro may be located around 127.00 against the yen and 1.00 against the greenback.

The euro fell to a 3-day low of 1.0551 against the Swiss franc, after having advanced to a 9-day high of 1.0699 at 2:55 am ET. Continuation of the euro’s downtrend may take it to a support around the 1.05 area.

The Swiss National Bank left its monetary policy unchanged as widely expected by economists.

The SNB maintained the target range for the three-month libor unchanged at between -1.25 percent and -0.25 percent. The interest rate on sight deposits with the SNB remained at -0.75 percent and the exemption thresholds remain unchanged, the bank said in a statement.

Pulling away from early highs of 1.4547 against the NZ dollar and 1.3673 against the Canadian dollar, the euro slipped to a 2-day low of 1.4355 and 3-day low of 1.3471, respectively. The euro may find downside target around 1.425 against the kiwi and 1.33 against the loonie.

The 19-nation currency fell to 1.3864 against the aussie, off an early high of 1.3999. Next key support for the euro is likely seen around the 1.36 region.

Looking ahead, the U.S. weekly jobless claims for the week ended March 14, leading indicators for February and current account for the fourth quarter are set for release in the New York session.

by RTT Staff Writer

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