Investing.com -- EUR/USD closed sharply higher on Thursday, erasing massive losses earlier in the session, as Mario Draghi pushed the euro dramatically upward by vowing not to cut interest rates any further after the European Central Bank adopted a wide range of stimulus measures at a closely-watched meeting.
The currency pair traded in a broad range between 1.0823 and 1.1217, before settling at 1.1178, up 1.75% on the session. At session lows, the euro fell to its lowest level against the dollar in six weeks. The euro, however, quickly rebounded following Draghi's comments, reaching its highest point since mid-February.
EUR/USD likely gained support at 1.0709, the low from January 5 and was met with resistance at 1.1378, the high from Feb. 11.
As expected, the European Central Bank's Governing Council approved a comprehensive set of easing initiatives on Thursday aimed at boosting economic growth throughout the euro zone and staving off deflation. The Governing Council used nearly all of the tools at its disposal to stimulate the economy by lowering three key rates at the meeting and extending the breadth and depth of its comprehensive Quantitative Easing program.
As part of its updated policy, the ECB lowered its deposit rate deeper into negative territory by reducing it by 0.1 to Minus-0.4%. The Governing Council also cut the marginal lending rate by 0.05 to 0.25% and the refinance rate by 0.05% to zero. At the same time, the central bank increased the size of monthly purchases with its bond-buying program by €20 billion to €80 billion a month and extended the program by several months through March, 2017.
In addition, the ECB introduced a new series of Long Term Refinancing Operations (LTROs) and announced that it will be purchasing non-financial corporate debt issued by companies established in the euro zone. While Draghi noted that he expects rates to remain low through the completion of the asset purchasing program, he emphasized at a press conference on Thursday that he doesn't see a need to cut rates any further.
"In taking into the account the measures to grow and return to our price stability objective we do not anticipate that it will be necessary to reduce further rates," Draghi said. "Of course new facts can change the outcome."
Draghi's comments may have been misconstrued by investors, as Thursday's sharp appreciation in the euro runs counter to the ECB's goal of pulling the currency down as a way of bolstering exports. The one-day gains in the euro are the strongest since early-December when the ECB disappointed markets by approving only limited easing measures at its final meeting of 2015.
Investors now turn their attention to next week's Federal Reserve meeting where the U.S. central bank is widely expected to leave short-term interest rates at their current level. Any rate hikes by the Fed this year are viewed as bullish for the dollar, as foreign investors pile into the greenback in order to capitalize on higher yields.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, surged to 98.42 following the release of the Monetary Policy statement, before settling at 96.19, down more than 1%. The index, which is down more than 2% over the last two months, fell to fresh three-and-a-half-week lows on Thursday.
Yields on the U.S. 10-Year rose six basis points to 1.93%, while yields on the Germany 10-Year also added six basis points to 0.30%.