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Published On: Mon, Sep 22nd, 2014

EUR/USD retreats following ECB Draghi’s warning of a slowdown in the euro zone recovery

The EUR/USD retreated on Monday, after ECB President Mario Draghi warned euro zone recovery is slowing down, and further momentum loss is possible.

The EUR/USD retreated on Monday, after ECB President Draghi warned euro zone recovery is slowing down, and further momentum loss is possible.

The euro slid gainst the greenback on Monday, following ECB President Mario Draghi’s warning that European recovery is slowing down. The EUR/USD was unaltered in US trading, at 1.2832, following the session low of 1.2816 and the 1.2868 high. Support for the pair is likely at 1.2754, the July 9 2013 low; resistance is expected just below 1.30.

Speaking to the European parliament committee on economic and monetary affairs, Mario Draghi discussed the economic slowdown in the euro area stating that further loss of momentum was possible. As Draghi said, there was some modest expansion in the last quarters, but then the GDP growth of the euro area halted.

Draghi once again pointed out that according to ECB expectations, inflation is to continue hovering on low levels in the coming months to gradually climb in 2015 and 2016. He added that the central bank stands ready to use other policy tools, if the situation warrants dealing with the risks of a lengthy low inflation period.

Last week’s data pointed to a steady annual rate of inflation in the euro area, at 0.4% in August, the lowest in about five years.

After Draghi’s statement, the EUR/USD was sold off offsetting soft US housing data. Housing sales slumped unexpectedly, by 1.8%, reaching an annual rate of 5.05 million in August. According to analysts’ projections, sales were expected to climb by 1% to 5.20 million.

Elsewhere, the EUR/GBP was down by 0.37%, at 0.7850, whereas the EUR/JPY declined by 0.14% to reach 139.75.

On Tuesday, the manufacturing purchasing managers’ indices for Germany and the euro zone are expected.

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