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Europe, Forex

Euro edges higher, but outlook stays bleak as ECB easing in focus

* ECB says it sees rates at “their present or lower levels” * Key benchmark euro zone rate kept unchanged at -0.40% * ECB’s Draghi sees low recession risk, but H2 rebound unlikely * U.S. data generally positive ahead of Fed meeting next week * Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh (New throughout, updates prices, market activity and comments) By Gertrude Chavez-Dreyfuss NEW YORK, July 25 (Reuters) – The euro bounced up on Thursday off a two-month low against the dollar, as investors bought the single currency after the European Central Bank failed to deliver an expected rate cut, while ECB President Mario Draghi offered optimism on the euro zone economy. Investors had priced in more than a 50% chance of an interest rate cut prior to Thursday’s ECB meeting. After the ECB kept rates unchanged, the euro recovered from lows. The bank’s statement said rates would stay “at their present or lower levels.” The common currency’s outlook remained downbeat due to the prospect of further monetary easing. “I think the market had fairly dovish expectations going into the ECB meeting and some in the market had priced in a cut,” said Mazen Issa, senior FX strategist, at TD Securities in New York. The actual decision was a signal to cover shorts on the euro, he added. “Now the question was: how dovish would Draghi be at his briefing? While he was pretty dovish, there were some positive elements as well,” Issa said. Draghi, at his press briefing, said he saw low risk of recession in the euro zone, but noted that a rebound in the second half was less likely. Rabobank in a research note said Draghi did not live up to expectation that he would be more specific about whether to institute a new asset purchase program. Draghi said there had been no discussion yet on policy tools. “This suggests that while today’s actions may have been supported by a broad consensus, the discussion in September on the actual easing package to be implemented may reveal more division in the Council. Clearly, not everyone is on the same page here,” Rabobank said. In afternoon trading, the euro was up 0.1% at $1.1146. Earlier, it dropped to a two-month low of $1.1102 after a bleak German Ifo business sentiment survey for July. The euro also rose 0.7% against the Swiss franc to 1.1046 francs, and was up 0.5% versus the yen at 121.217yen. The dollar index was up 0.1% at 97.813, led by gains against the yen. The greenback rose rising 0.5% to 108.71 yen after a batch of generally positive U.S. economic data. New orders for key U.S.-made capital goods surged 1.9% in June, while weekly jobless claims declined to 206,000. “The strong data suggested any rate cuts by the Fed would be the modest insurance variety and not the start of a full-blown easing cycle,” said Joe Manimbo, senior market analyst, at Western Union Business Solutions in Washington. The Federal Reserve’s monetary policy meeting is scheduled next week, and investors are widely expecting an interest rate cut. ======================================================== Currency bid prices at 3:08 PM (1908 GMT) Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid Previous Change Session Euro/Dollar EUR= $1.1148 $1.1139 +0.08% -2.80% +1.1187 +1.1102 Dollar/Yen JPY= 108.6800 108.1700 +0.47% -1.43% +108.7500 +108.0500 Euro/Yen EURJPY= 121.17 120.50 +0.56% -4.00% +121.3600 +120.0600 Dollar/Swiss CHF= 0.9906 0.9847 +0.60% +0.94% +0.9917 +0.9845 Sterling/Dollar GBP= 1.2454 1.2481 -0.22% -2.38% +1.2517 +1.2437 Dollar/Canadian CAD= 1.3160 1.3139 +0.16% -3.51% +1.3167 +1.3115 Australian/Doll AUD= 0.6947 0.6976 -0.42% -1.45% +0.6984 +0.6943 ar Euro/Swiss EURCHF= 1.1048 1.0969 +0.72% -1.83% +1.1055 +1.0963 Euro/Sterling EURGBP= 0.8949 0.8923 +0.29% -0.39% +0.8959 +0.8892 NZ NZD= 0.6659 0.6704 -0.67% -0.86% +0.6707 +0.6654 Dollar/Dollar Dollar/Norway NOK= 8.6743 8.6432 +0.36% +0.41% +8.6855 +8.6313 Euro/Norway EURNOK= 9.6710 9.6259 +0.47% -2.37% +9.6875 +9.5962 Dollar/Sweden SEK= 9.4482 9.4264 +0.33% +5.40% +9.4633 +9.4229 Euro/Sweden EURSEK= 10.5364 10.5018 +0.33% +2.65% +10.5547 +10.4890 (Reporting by Gertrude Chavez-Dreyfuss; Editing by Susan Thomas and David Gregorio)


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