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Euro Loses Ground Against US Dollar as ECB Maintains Interest Rates Unchanged

June 8, 2017 at 14:41 by Yahia Barakah

Various euro denominationsThe euro lost ground against the US dollar on Thursday after the European Central Bank decided to keep interest rates unchanged after concluding its June’s monetary policy meeting. The shared currency remained stable against the British pound as the market awaited the outcome of a vote that decides Members of Parliament in the United Kingdom.

Following a meeting that was held in Tallinn, the Governing Council of the European Central Bank decided to maintain the euro zone’s interest rates unchanged at 0%, which met expectations. The Governing Council said in a statement that interest rates are expected to remain at the same level for an extended period of time, possibly past the end of the quantitative easing program.

The decision, which was released at 11:45 GMT today, was followed by a press conference held by European Central Bank President Mario Draghi at 12:30 GMT. Draghi confirmed that the bank’s quantitative easing program will run to December 2017, or beyond if inflation remains weak. The ECB president said that inflation is yet to reflect economic growth within the region, which requires the central bank to continue providing economic stimulus.

The ECB appears to be willing to take further interest rate cuts if necessary, which added to reports on Wednesday that said the ECB might cut its inflation outlook. The central bank’s dovish stance came despite positive economic data in the European Union over the past weeks.

Eurostat, the European Union’s statistical office, said earlier today that the region’s gross domestic product rose to 0.6% in the first quarter of 2017 from 0.5% in the previous quarter. The data beat estimates of a 0.5% growth, which lifted yearly GDP growth to 1.9% from 1.7% in the final quarter of 2016. However, the euro declined as the positive data was overshadowed by the ECB’s decision.

Meanwhile, voters in the United Kingdom went to polling stations to choose Members of Parliament in a snap general election that was approved by the House of Commons last April. Latest polls showed that Prime Minister Theresa May’s Conservative Party was 8 points ahead of the Labour Party. The euro moved within a tight range against the British pound today as traders anticipated the outcome of the election.

EUR/USD declined to 1.1197 at 14:10 GMT on Thursday, the pair’s lowest level since May 31, from 1.1255 when trading began today. EUR/GBP was at 0.8673 from 0.8690 at 13:05 GMT, the pair’s highest level today. EUR/GBP started the day off at 0.8681.

If you have any questions, comments or opinions regarding the Euro, feel free to post them using the commentary form below.

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