Euro Trades Lower on ECB Jawboning and Positive Eurozone Data

The euro today traded at new lows against the US dollar after members of European Central Bank issued warnings regarding the euro’s exchange rate. The single currency largely ignored the positive Eurozone inflation data released in the early European session.

The EUR/USD currency pair lost over 120 points to drop from a high of 1.2322 to hit a daily low of 1.2196 in the mid-European session.

The euro’s slide started in the Asian session after hitting a 3-year high and was largely fueled by the rebound in US dollar demand. The euro dropped further after comments made by Vitor Constancio who stated that he would be worried by euro moves that did not reflect fundamentals. His comments were later supported by ECB Governing Council member Ewald Nowotny who stated that euro’s exchange rate should be monitored and that the euro’s strengthening was unhelpful. The two comments by top ECB members were interpreted by investors as jawboning, which drove the euro lower.

The release of the positive Eurozone CPI data for December by Eurostat had minimal impact on the currency pair. The core CPI came in at 0.9%, while the headline CPI was recorded at 1.4%, both prints were in-line with expectations. The release of the positive US MBA mortgage applications data also had minimal impact on the pair.

The currency pair’s future performance is likely to be affected by US releases such as the NAHB housing market index.

The EUR/USD currency pair was trading at 1.2223 as at 14:35 GMT having recovered slightly from a daily low of 1.2196. The EUR/JPY currency pair was trading at 135.28 having dropped from a high of 135.90.

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