Euro Falls As Report Say Market Misinterpreted Draghi's Speech

The euro declined against its major opponents in the European session on Wednesday, after a media report showed that the market had misinterpreted remarks by the European Central Bank Mario Draghi as a signal towards reducing the monetary stimulus.

Draghi was intending to strike a balance between recognizing the bloc's economic strength and the need for continued monetary support, Bloomberg reported citing ECB officials.

The ECB sources said that Draghi was aiming to strike a balance between the bloc's economic growth and inflationary slowdown and not an imminent policy tightening.

Speaking at the ECB's central banking forum in Portugal on Tuesday, Draghi said "deflationary forces have been replaced by reflationary ones." His comments were interpreted by market as an indication of a shift in the bank's aggressive stimulus policy, sparking a rally in the euro.

Data from the European Central Bank showed that Eurozone monetary aggregate expanded in May and credit to the private sector increased at a slightly faster pace.

The broad monetary aggregate M3 climbed 5 percent year-on-year in May, following a 4.9 percent rise in April. M3 growth matched economists' expectations. The annual growth averaged 5.1 percent in three months to May.

The currency was higher against its major counterparts in the Asian session.

The euro fell to 2-day low of 0.8780 against the pound, after having advanced to near an 8-month high of 0.8880 at 2:15 am ET. Continuation of the euro's downtrend may see it challenging support around the 0.86 region.

Data from the Nationwide Building Society showed that UK house prices increased in June after declining for three straight months.

House prices advanced 1.1 percent month-on-month, reversing a 0.2 percent fall in May. Economists had forecast a marginal 0.1 percent rise.

The single currency dropped to 1.1292 against the greenback and 126.48 against the yen, off its early 1-year high of 1.1388 and a 3-month high of 127.86, respectively. The euro is poised to target support around 1.10 against the greenback and 125.00 against the yen.

Reversing from an early nearly 5-week high of 1.0925 against the Swiss franc, the euro slipped to 1.0885. The next possible support for the euro-franc pair is seen around the 1.07 level.

The euro edged down to 1.5496 against the kiwi and 1.4866 versus the aussie, from its early 3-week highs of 1.5679 and 1.4998, respectively. On the downside, 1.52 and 1.46 are possibly seen next support levels for the euro against the kiwi and the aussie, respectively.

The single currency hit a 5-day low of 1.4782 against the loonie, from more than a 2-week high of 1.4979 hit at 3:45 am ET. If the euro extends decline, 1.47 is likely seen as its next support level.

Looking ahead, U.S. pending home sales for May are due shortly.