Euro Declined As ECB Lowered Euro-Zone Economic Growth Outlook

Euro Declined As ECB Lowered Euro-Zone Economic Growth Outlook

For the 24 hours to 23:00 GMT, EUR declined 0.84% against the USD and closed at 1.2962, after the European Central Bank (ECB) slashed the growth outlook for the 17-nation economy for this year and next.

At a press conference, the ECB President, Mario Draghi, stated that weak activity is expected to extend into next year, reflecting the adverse impact on domestic expenditure of weak consumer and investor sentiment and subdued foreign demand. He further indicated that a gradual recovery should start later in 2013.

The ECB now expects the Euro-zone economy to contract by between 0.4% and 0.6% this year and to shrink by 0.3% to 0.9% in 2013. The ECB expects the Euro-zone economy to return to growth only in 2014, expanding between 0.2% and 2.2%.

Earlier, the ECB left its benchmark interest rate unchanged at 0.75% in December, in line with market expectations. The central bank also maintained its deposit rate at zero and the marginal lending facility rate at 1.50% in December.

On the economic front, the seasonally adjusted Gross Domestic Product (GDP) in the Euro-zone fell 0.1% (QoQ) in the Q3 FY2012, in line with the market expectation and following a similar contraction in the previous quarter. Meanwhile, Germany’s seasonally adjusted factory orders advanced 3.9% (MoM) in October, surpassing the market expectation for a 1.0% rise and compared to a 2.4% fall in the previous month.