The euro continued to be lower against its key counterparts in the European session on Thursday, as minutes from the latest monetary policy meeting of the European Central Bank showed that policy makers were worried about the recent appreciation of the domestic currency, cautioning that "favourable financing conditions could not be taken for granted" and hinge on a continued high degree of monetary policy accommodation to a certain extent. The minutes from the bank's July 19-20 policy session showed that policymakers at the European Central Bank expressed concerns about a possible overshooting in the repricing by financial markets, notably the foreign exchange markets, in future. "The still favorable financing conditions could not be taken for granted and relied to a considerable extent on a continued high degree of monetary policy accommodation." Although policymakers suggested making "incremental" adjustment to their forward guidance, they dismissed the idea as it could be better "to avoid sending signals that could be prone to over-interpretation and might prove premature." Even as measures of underlying inflation shows some tentative signs of a pick-up, it still needed to show conclusive evidence of a sustained upward trend. Hence, the Governing Council reiterated, "A very substantial degree of monetary accommodation was still needed for underlying inflation pressures to build up gradually and support headline inflation developments in the medium term." Final data from Eurostat showed that Eurozone inflation remained stable as initially estimated in July.
Inflation in the currency bloc held steady at 1.3 percent in July.
Separate data from the same agency showed that the euro area trade surplus increased to a 6-month high in June as the pace of decrease in imports was bigger than the fall in exports.
The trade surplus rose to a seasonally adjusted EUR 22.3 billion from EUR 19 billion in May. This was the highest surplus seen so far this year.
The euro showed mixed performance in the Asian session. While the euro held steady against the pound and the franc, it rose against the greenback. Against the yen, the currency weakened.
The single currency weakened to a 2-day low of 0.9063 against the pound, following an advance to 0.9136 at 2:45 am ET. The euro is likely to find support around the 0.90 area. According to the data from the Office for National Statistics, UK retail sales increased more than expected in July on food store sales.
Retail sales volume grew 0.3 percent month-on-month in July, the same rate as logged in June. Sales were expected to rise at a slower pace of 0.2 percent.
Having climbed to a 2-day high of 1.1790 against the greenback at 10:00 pm ET, the euro reversed direction and fell to a 3-week low of 1.1663. Continuation of the euro's downtrend may see it challenging support around the 1.15 region. The euro slid to a 6-day low of 1.1304 against the Swiss franc, compared to 1.1364 hit late New York Wednesday. The euro is seen finding support around the 1.12 mark. The 19-nation currency that finished Wednesday's deals at 129.62 against the yen dipped to a 6-day low of 128.55. The next possible support for the euro-yen pair is seen around the 127.00 region. Data from the Ministry of Finance showed that Japan logged a merchandise trade surplus of 418.8 billion yen in July. That topped forecasts for a surplus of 327.1 billion yen but was down from 439.8 billion yen in June.
The euro dropped to a weekly low of 1.5996 versus the kiwi, more than 2-week lows of 1.4730 against the loonie and 1.4733 against the aussie, off its early highs of 1.6116, 1.4873 and 1.4865, respectively. Further weakness may see the euro challenging support around 1.59 against the kiwi, 1.47 against the loonie and 1.46 against the aussie. Looking ahead, U.S.leading indicators for July are set for release shortly.
In today's events, Dallas Fed President Robert Kaplan speaks at the "Dialogue with the Dallas Fed" event hosted by the Lubbock Chamber of Commerce in Texas at 1:00 pm ET.
Minneapolis Fed President Neel Kashkari will speak at an event hosted by the Edina Rotary Club in Minnesota at 1:45 pm ET.