Euro Weakens As Minutes Show ECB Wary Over Currency Strength, QE Exit

The euro dropped against its major counterparts in the European session on Thursday, as the minutes from the latest policy meeting showed that policy makers of the European Central Bank expressed concern over recent movements in the currency exchange rate, while agreeing on need to ensure substantial degree of monetary policy accommodation to achieve its policy objective.

The recent volatility of the euro exchange rate reflects a source of uncertainty, which required monitoring with respect to its possible implications for the medium-term outlook for price stability, the minutes of the September 6-7 meeting showed.

"There was broad agreement among members that a very substantial degree of monetary accommodation was still needed for inflation pressures to build up and support headline inflation over the medium term," it showed.

"It was also argued that the monetary policy stance would remain highly accommodative in either scenario on account of the range of policy instruments in place, most notably the reinvestment of the principal of maturing securities, the liquidity related to the targeted longer-term refinancing operations, and the forward guidance on the ECB's key policy rates," it noted.

Speaking to weekly magazine Trend, ECB Governing Council member Ewald Nowotny said that the bank may slowdown the QE purchases at the beginning of next year. "I assume that we will transition to a cautious deceleration at the start of the coming year," he told.

Catalan parliament is planning a debate and a vote on the independence referendum on Monday, followed by declaration of independence shortly after. "I am sure that in the next few days we will show the best of our country when the institutions of Catalonia will have to apply the results of the referendum," Catalan President Carles Puigdemont said.

Data from IHS Markit showed that Germany's construction sector growth softened in September.

The headline Purchasing Managers' Index dropped to 53.4 in September from 54.9 in August. Nonetheless, a reading above 50 indicates expansion.

The currency held steady against its major rivals in the Asian session.

The euro reversed from an early high of 1.1779 against the greenback, weakening to a 2-day low of 1.1734. The euro is poised to find support around the 1.15 region.

The 19-nation currency slid to a 9-day low of 131.98 against the Japanese yen, following a high of 132.77 hit at 3:00 am ET. On the downside, 130.00 is possibly seen as the next support level for the euro.

The euro eased back to 1.1461 against the Swiss franc, off its early 10-day high of 1.1495. The euro is seen finding support around the 1.13 mark.

Data from the Federal Statistical Office showed that Switzerland's consumer price inflation accelerated in September.

Consumer prices climbed 0.7 percent year-on-year in September, faster than the 0.5 percent increase seen in August. Prices were forecast to rise 0.6 percent.

The euro was trading lower at 1.6413 against the kiwi, reversing from more than a 2-week high of 1.6453 hit at 4:00 am ET. The next possible support for the euro is seen around the 1.63 level.

The 19-nation currency dropped to a weekly low of 1.4636 against the loonie, from an early high of 1.4692. If the euro falls further, 1.45 is likely seen as its next support level.

The euro fell back to 1.5012 against the aussie, from a 2-day high of 1.5048 hit at 6:00 am ET. The currency had already set an 8-day low of 1.4940 early in the Asian session. Further downtrend may take the euro to a support around the 1.48 area.

Data from the Australian Bureau of Statistics showed that Australia logged a merchandise trade surplus of A$989 million in August.

That beat forecasts for a surplus of A$870 million following the upwardly revised A$808 million surplus in July

Having advanced to a 3-week high of 0.8934 against the pound at 3:30 am ET, the single currency held steady in subsequent part of the trading session. The pair was valued at 0.8875 when it closed deals on Wednesday.

Looking ahead, U.S. factory orders and durable goods orders for August are slated for release shortly.

At 10:00 am ET, Federal Reserve Bank of Philadelphia President Patrick Harker is scheduled to speak at the Investing in America's Workforce Conference hosted by the Federal Reserve System, in Austin.

At 12:00 pm ET, Bank of England MPC Member Ian McCafferty is expected to speak at The Founders' Company Annual Lecture, in London.

At 1:30 pm ET, Bank of England Chief Economist Andy Haldane is to deliver a presentation titled "Central Bank Engagement with Society" at the Economic Research Council, in London.

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