The euro drifted lower against its most major counterparts in the European session on Thursday, after the European Central Bank left its key interest rates unchanged and signaled that it would accelerate purchases under the pandemic emergency purchase programme in the next quarter to counter the rise in bond yields.

The Governing Council maintained the main refi rate at a record low of zero percent and the deposit rate at -0.50 percent. The marginal lending facility rate is at 0.25 percent.

The Governing Council retained the pandemic emergency purchase programme at EUR 1.85 trillion.

The purchases under the PEPP will be conducted at a significantly higher pace in the next quarter than during the first months of this year.

“The Governing Council will purchase flexibly according to market conditions and with a view to preventing a tightening of financing conditions that is inconsistent with countering the downward impact of the pandemic on the projected path of inflation,” the bank said.

Net asset purchases under the PEPP will be conducted until at least the end of March 2022 and, in any case, until the Governing Council judges that the coronavirus crisis phase is over.

Proceeds from maturing securities under PEPP will be reinvested until at least the end of 2023.

The euro showed mixed performance against its key counterparts in the previous session. While it held steady against the greenback and the pound, it appreciated against the yen and the franc.

The euro pulled back to 1.1942 against the greenback, after climbing to a 6-day high of 1.1969 at 3:45 am ET. The next possible support for the euro is seen around the 1.18 level.

The euro reached as low as 1.1053 against the franc, declining from a 2-day high of 1.1102 seen at 9:15 pm ET. The euro is seen locating support around the 1.08 region.

Report from the State Secretariat for Economic Affairs showed that the Swiss economy is set to recover at a rapid pace amid the easing of coronavirus measures after contraction in the first quarter.

Gross domestic product is forecast to grow 3 percent in 2021 and 3.3 percent next year. The projection for this year was left unchanged, while that for 2022 was revised up from 3.1 percent.

The European currency reversed from an early 2-day high of 0.8582 versus the pound, with the pair trading at 0.8554. If the euro slides further, it may find support around the 0.82 level.

The Residential Market Survey from the Royal Institution of Chartered Surveyors showed that British house prices increased again in February but the current lockdown restrictions weighed on the sales market activity.

The house price balance rose to 52 percent in February from 49 percent in the previous month. Further, twelve month price expectations picked up, with the net balance climbing to +46 percent from +30 percent in January.

In contrast, the euro remained higher against the yen, at a 2-week high of 129.89. The euro is likely to challenge resistance around 131.5 level.

Data from the Bank of Japan showed that Japan producer prices rose 0.4 percent on month in February.

That was shy of expectations for an increase of 0.5 percent and was unchanged from the January reading.


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