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 http://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
EUR= , 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 EURCHF= , and was up 0.6% versus the yen at 121.20 yen
JPY= .
The dollar index, on the other hand, slipped 0.2% to 97.574
.DXY , led by losses versus the euro.
The greenback gained against the yen, however, rising 0.3%
to 108.47 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 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 GBP=D3 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