Euro crumbled to five-week lows against the US dollar on Draghi comments

Euro took a sharp fall against the US dollar to five-week lows, as the regular press conference of the European Central Bank began and after President Mario Draghi stressed that monetary policy will remain loose as long as needed.

EUR/USD pair hit a new session low at 1.2884 at 13:00 GMT, after which consolidation followed in the 1.2901-1.2906 zone. Support was expected at May 29th low, 1.2836, while resistance was to be encountered at psychological 1.3000 level.

The European Central Bank (ECB) confirmed expectations of market players by leaving its base interest rate unchanged at 0.50%, as policy remained loose, because of the almost two-year recession period, which the Euro region has been struggling with. Such decision came as no surprise to experts. During the last few days ECB officials tried to convince investors that altering the current monetary policy course was out of question at this point. Economy in the single currency zone has entered the sixth consecutive quarter of contraction, though recent economic data raised hopes of stabilization. Mario Draghi, at the central banks press conference today, said the decision to give forward guidance on interest rates was taken unanimously by policymakers and was “a very significant step forward” for the bank. He also announced that risks to economic growth in the Euro zone remained “on the downside” and that monetary policy will remain accommodative for as long as necessary. This made clear that an increase in interest rates was not likely. On the contrary, these remarks made way for a possible new cuts in rates. According to Draghi, ECB was still technically ready to introduce negative interest rates on deposits. All in all, no new measures were proposed.

The euro erased gains against the British pound, as EUR/GBP cross moved up by 0.55% to 0.8558, bouncing off session highs at 0.8632.

Meanwhile, investors turned their attention to Fridays series of crucial indicators from the United States, including Unemployment rate and non-farm payrolls, following todays Independence day holiday, when US markets remained close and trade volumes were thin.