Euro Strengthens After ECB Nowotny's Remarks

The euro drifted higher against its key counterparts in the European session on Tuesday, after the European Central Bank Governing Council member Ewald Nowotny said that the central bank's asset purchase program would exit this year, taking a step closer to normalizing policy.

In an interview with Reuters, Nowotny called the ECB to get on with the process of policy normalization, in order to ensure that it can take a gradual approach and begin with a hike in the deposit rate.

"I would have no problem with moving from -0.4 percent to -0.2 percent as a first step and then, as a second step, include the (main refinancing) policy rate," he told.

Nowotny, meanwhile, indicated that the exact timing of the rate hike is too early to tell.

"One of the strong arguments for moving perhaps a bit faster (with policy normalisation) is exactly to have some room for manoeuvre if we should see some deterioration in the economic condition," Nowotny added.

Sentiment improved after comments from Chinese Premier Xi Jinping regarding the trade dispute between China and the U.S.

Xi promised to lower import tariffs on products including cars and take other steps to further open the world's second-largest economy.

The currency traded mixed against its major rivals in the Asian session. While it fell against the greenback and the pound, it rose against the yen. Against the franc, it held steady.

The euro climbed to near a 2-month high of 132.48 against the yen and near a 2-week high of 1.2377 against the greenback, from its early lows of 131.42 and 1.2303, respectively. The next possible resistance for the euro is seen around 135.00 against the yen and 1.25 against the greenback.

The euro hit a 5-day high of 1.1805 against the Swiss franc and a 4-day high of 0.8728 against the pound, reversing from its early low of 1.1768 and near a 3-week low of 0.8692, respectively. The euro is seen finding resistance around 1.20 against the Swiss franc and 0.90 against the pound.

The euro bounced off to 1.5680 against the loonie, 1.6829 against the kiwi and 1.5987 against the aussie, from its early 4-day low of 1.5604, near 2-month low of 1.6763 and a 5-day low of 1.5907, respectively. On the upside, 1.59, 1.70 and 1.61 are seen as the next resistance levels for the euro against the loonie, the kiwi and the aussie, respectively.