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Forex News: Euro Weakens As ECB Member Rehn Pushes Back

Euro Weakens As ECB Member Rehn Pushes Back Rate Hike Expectations

05/29/2019 - 06:57:00 (RTTNews)

(RTTNews) - The euro drifted lower against its key counterparts in the European session on Wednesday, after an European Central Bank policymaker remarked that the central bank is set to discuss methods to help counter a slowdown in the economy and provide the details of new TLTRO operations at the meeting in June.

The ECB is willing to "adjust and use" all its policy instruments if there is a new recession, ECB Governing Council member and Bank of Finland chief Olli Rehn told at a Reuters Breakingviews event.

"Our central scenario is not a recession," he said.

"We have a soft patch in the economy," Rehn added.

Rehn also pushed back rate hike expectations, saying that the first rate increase is now too away than it was a few months before.

Risk-off mood continued as Chinese newspapers warned Beijing was ready to use its dominance of rare earths as a counter in its trade battle with Washington.

The U.S. imports about 80 percent of its rare earth elements, used in a host of electronic components, from China.

Italy's dispute over its budget with the European Union also kept investors nervous.

The currency was also weighed by German data showing a rise in unemployment in May for the first time in nearly two years.

Figures from the Federal Employment Agency showed that the number of unemployed rose by 60,000 month-on-month, while economists had expected a decline of 7,000. In April, there was a fall of 12,000.

The jobless rate climbed to 5 percent in May, equaling the rate seen in February. Economists had expected the rate to remain unchanged at the record low of 4.9 percent logged in each of the previous two months.

The euro showed mixed trading against its major counterparts in the Asian session. While it held steady against the greenback and the pound, it fell against the franc and the yen.

The euro depreciated to a 5-day low of 1.1211 against the franc from Tuesday's closing quote of 1.1245. The euro is poised to test support around the 1.11 mark.

The single currency that closed Tuesday's trading at 1.1160 against the greenback weakened to a 6-day low of 1.1150. Next key support for the euro is seen around the 1.09 level.

The euro moved down to 121.75 against the Japanese yen, its weakest since January 3. The euro is seen finding support around the 118.00 region.

The common currency pared its early gains to 0.8817 against the pound, from a high of 0.8832 hit at 4:15 am ET. Further downtrend may take the euro to a support around the 0.87 level.

The latest quarterly services sector survey data from Confederation of British Industry showed that Business conditions across the British service sector continued to decline sharply in three months to May.

The balance for business volumes fell -19 percent, the fastest pace since August 2012. Profits declined sharply by -24 percent, the quickest since November 2011.

On the flip side, the euro climbed to a 5-day high of 1.7121 against the kiwi, after having dropped to a 9-day low of 1.7049 at 9:00 pm ET. The euro is likely to find resistance around the 1.73 region.

The euro rose to 1.5077 against the loonie and 1.6139 against the aussie, from its early low of 1.5045 and a 9-day low of 1.6107, respectively. If the euro rises further, 1.52 and 1.63 are possibly seen as its next resistance levels against the loonie and the aussie, respectively.

Looking ahead, at 10:00 am ET, the Bank of Canada announces its interest rate decision. Economists expect the benchmark rate to remain at 1.75 percent.

For comments and feedback: contact editorial@rttnews.com

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