July 25, 2019 / 2:45 PM / a month ago

FOREX-Euro rallies, but outlook stays bleak as ECB easing in focus

    * ECB says it sees rates at "their present or lower levels"
    * Key benchmark rate kept unchanged at -0.40%
    * ECB's Draghi sees low recession risk, but H2 rebound
unlikely
    * U.S. data generally positive ahead of Fed meeting next
week 
    * Sterling trades under $1.25 vs dollar
    * Graphic: World FX rates in 2019 tmsnrt.rs/2egbfVh

 (Recasts, adds comment, updates prices, changes byline,
dateline; previous LONDON)
    By Gertrude Chavez-Dreyfuss
    NEW YORK, July 25 (Reuters) - The euro rose from a two-month
low against the dollar on Thursday, after the European Central
Bank failed to deliver an interest rate cut that some investors
had expected and after its president Mario Draghi offered a
glimmer of optimism about his outlook on the euro zone economy.
    Investors prior to Draghi's comments had priced in a dovish
message. 
    The euro recovered after the ECB, which kept interest rates
unchanged, said in its statement rates would stay "at their
present or lower levels" and opened the door for more
quantitative easing.
    Despite Thursday's gains, the euro's outlook remained
downbeat due to the prospect of further monetary easing.
    "I think the market had fairly dovish expectations going
into the ECB meeting and some in the market had priced in a
cut," said Mazen Issa, senior FX strategist, at TD Securities in
New York.
    When the market did not get the cut, that was a signal to
cover the shorts on the euro, he added.
    "Now the question was: how dovish would Draghi be at his
briefing? While he was pretty dovish, there were some positive
elements as well," Issa said.
    Draghi, at his press briefing, said he saw low risk of
recession in the euro zone, but noted that a rebound in the
second half was less likely, as he voiced concerns about
stubbornly low inflation.
    In mid-morning trading, the euro rose 0.3% to $1.1170
, after earlier dropping to a fresh two-month low of
$1.1102.
    Earlier in the day, the euro was trading lower after a bleak
German Ifo business sentiment survey for July.
    The European common currency gained for the first time in
five days and has shed 1.7% against the dollar so far this
month. 
    The euro also rose 0.6% against the Swiss franc to 1.1038
francs, and was up 0.6% versus the yen at 121.20 yen
.
    The dollar index, on the other hand, slipped 0.2% to 97.574
, led by losses versus the euro. 
    The greenback gained against the yen, however, rising 0.3%
to 108.47 yen after a batch of generally positive U.S.
economic data.
    New orders for key U.S.-made capital goods surged 1.9% in
June, while weekly jobless claims declined to 206,000 in the
latest week.
    "The strong data suggested any rate cuts by the Fed would be
the modest insurance variety and not the start of a full blown
easing cycle," said Joe Manimbo, senior market analyst, at
Western Union Business Solutions in Washington. 
    The Federal Reserve's monetary policy meeting is scheduled
next week, and investors are widely expecting an interest rate
cut.
    The pound, meanwhile, remained below $1.25 against the U.S.
dollar and not far from the 27-month low it reached last week.
It last traded at $1.2474 as new Prime Minister Boris
Johnson assembled his cabinet.
    
    ========================================================
    Currency bid prices at 10:29 AM (1429 GMT)
 Description      RIC         Last           U.S. Close  Pct Change     YTD Pct     High Bid    Low Bid
                                              Previous                   Change                 
                                              Session                                           
 Euro/Dollar      EUR=        $1.1171        $1.1139     +0.29%         -2.61%      +1.1187     +1.1102
 Dollar/Yen       JPY=        108.4400       108.1700    +0.25%         -1.65%      +108.4900   +108.0500
 Euro/Yen         EURJPY=     121.15         120.50      +0.54%         -4.02%      +121.3600   +120.0600
 Dollar/Swiss     CHF=        0.9877         0.9847      +0.30%         +0.64%      +0.9903     +0.9845
 Sterling/Dollar  GBP=        1.2475         1.2481      -0.05%         -2.21%      +1.2517     +1.2466
 Dollar/Canadian  CAD=        1.3131         1.3139      -0.06%         -3.71%      +1.3152     +1.3115
 Australian/Doll  AUD=        0.6956         0.6976      -0.29%         -1.32%      +0.6984     +0.6951
 ar                                                                                             
 Euro/Swiss       EURCHF=     1.1034         1.0969      +0.59%         -1.95%      +1.1055     +1.0963
 Euro/Sterling    EURGBP=     0.8953         0.8923      +0.34%         -0.35%      +0.8959     +0.8892
 NZ               NZD=        0.6675         0.6704      -0.43%         -0.63%      +0.6707     +0.6673
 Dollar/Dollar                                                                                  
 Dollar/Norway    NOK=        8.6582         8.6432      +0.17%         +0.23%      +8.6721     +8.6313
 Euro/Norway      EURNOK=     9.6729         9.6259      +0.49%         -2.35%      +9.6875     +9.5962
 Dollar/Sweden    SEK=        9.4319         9.4264      +0.34%         +5.22%      +9.4633     +9.4229
 Euro/Sweden      EURSEK=     10.5372        10.5018     +0.34%         +2.67%      +10.5547    +10.4890
 
    
    

 (Reporting by Gertrude Chavez-Dreyfuss; Additional reporting by
Olga Kotaga in London
Editing by Susan Thomas)
  
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