Forex - EUR/USD erases gains after Draghi comments

Forex Focus - The euro erased gains against the U.S. dollar on Wednesday, pulling away from a session high as European Central Bank President Mario Draghi delivered opening remarks on the central bank’s earlier policy meeting.

EUR/USD pulled away from 1.2527, the daily high, to hit 1.2452 during European afternoon trade, easing 0.02%.

The pair was likely to find support at 1.2385, the low of June 4 and resistance at 1.2541, Tuesday’s high.

The euro came under pressure after ECB President Draghi said that the economic outlook faces downside risks, adding that indicators for the second quarter point to weakening growth in the euro zone.

Draghi also said that main refinancing operations will continue to be conducted for as long as necessary, extending the operations until the end of the January 15, 2013.

The comments came after the central bank left interest rates unchanged at 1%, in a widely expected move.

Investors had remained cautious after Spain warned on Tuesday that it was having difficulty accessing credit markets, while uncertainty over the outcome of Greek elections on June 17 also weighed.

Earlier in the day, revised data showed that the euro zone economy was stagnant in the first quarter, in line with preliminary estimates, but gross domestic product contracted at an annualized rate of 0.1% in the three months to March, compared to a preliminary flat reading.

A separate report showed that German industrial production dropped 2.2% in April, compared to expectations for a more modest 1.0% decline, fuelling concerns over the impact of the ongoing sovereign debt crisis on the region’s largest economy.

Elsewhere, the euro was lower against the pound with EUR/GBP declining 0.51%, to hit 0.8052.

Later in the day, the U.S. was to release revised data on nonfarm productivity, followed by government data on crude oil stockpiles, while the Federal Reserve was to release its Beige Book.