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

* ECB says it sees rates at "their present or lower levels"
* Key benchmark euro zone 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
* Graphic: World FX rates in 2019 http://tmsnrt.rs/2egbfVh

(New throughout, updates prices, market activity and comments)
By Gertrude Chavez-Dreyfuss
NEW YORK, July 25 (Reuters) - The euro bounced up on Thursday off a two-month low against the dollar,
as investors bought the single currency after the European Central Bank failed to deliver an expected rate
cut, while ECB President Mario Draghi offered optimism on the euro zone economy.
Investors had priced in more than a 50% chance of an interest rate cut prior to Thursday's ECB
meeting. After the ECB kept rates unchanged, the euro recovered from lows.
The bank's statement said rates would stay "at their present or lower levels." The common
currency'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. The actual
decision was a signal to cover 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. Rabobank in a research note said Draghi did not live up to expectation that he would be more specific
about whether to institute a new asset purchase program. Draghi said there had been no discussion yet on
policy tools.
"This suggests that while today's actions may have been supported by a broad consensus, the discussion
in September on the actual easing package to be implemented may reveal more division in the Council.
Clearly, not everyone is on the same page here," Rabobank said.
In afternoon trading, the euro was up 0.1% at $1.1146 EUR= . Earlier, it dropped to a two-month low
of $1.1102 after a bleak German Ifo business sentiment survey for July. The euro also rose 0.7% against the Swiss franc to 1.1046 francs EURCHF= , and was up 0.5% versus the
yen at 121.217yen EURJPY= .
The dollar index was up 0.1% at 97.813 .DXY , led by gains against the yen. The greenback rose rising
0.5% to 108.71 yen JPY= 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. "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. Currency bid prices at 3:08 PM (1908 GMT)
Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid
Previous Change
Session
Euro/Dollar EUR= $1.1148 $1.1139 +0.08% -2.80% +1.1187 +1.1102
Dollar/Yen JPY= 108.6800 108.1700 +0.47% -1.43% +108.7500 +108.0500
Euro/Yen EURJPY= 121.17 120.50 +0.56% -4.00% +121.3600 +120.0600
Dollar/Swiss CHF= 0.9906 0.9847 +0.60% +0.94% +0.9917 +0.9845
Sterling/Dollar GBP= 1.2454 1.2481 -0.22% -2.38% +1.2517 +1.2437
Dollar/Canadian CAD= 1.3160 1.3139 +0.16% -3.51% +1.3167 +1.3115
Australian/Doll AUD= 0.6947 0.6976 -0.42% -1.45% +0.6984 +0.6943
ar
Euro/Swiss EURCHF= 1.1048 1.0969 +0.72% -1.83% +1.1055 +1.0963
Euro/Sterling EURGBP= 0.8949 0.8923 +0.29% -0.39% +0.8959 +0.8892
NZ NZD= 0.6659 0.6704 -0.67% -0.86% +0.6707 +0.6654
Dollar/Dollar
Dollar/Norway NOK= 8.6743 8.6432 +0.36% +0.41% +8.6855 +8.6313
Euro/Norway EURNOK= 9.6710 9.6259 +0.47% -2.37% +9.6875 +9.5962
Dollar/Sweden SEK= 9.4482 9.4264 +0.33% +5.40% +9.4633 +9.4229
Euro/Sweden EURSEK= 10.5364 10.5018 +0.33% +2.65% +10.5547 +10.4890