Forex - EUR/USD erases losses on ECB liquidity move

Forex News - The euro erased earlier losses against the U.S. dollar on Thursday, bouncing off a two-day low after the European Central Bank said it plans to launch new liquidity measures in a response to the region's debt crisis.

EUR/USD rebounded from 1.3242, the pair's lowest since October 4 to hit 1.3406 during early U.S. trade, gaining 0.42%.

The pair was likely to find support at 1.3165, the low of October 3 and resistance at 1.3549, the high of September 26.

Earlier in the day, outgoing ECB President Jean-Claude Trichet announced that the bank would resume covered bond purchases and conduct two longer-term refinancing operations, saying that these measures "will continue to ensure that euro-area banks are not constrained on the liquidity side."

The announcement came after the ECB left its interest rate unchanged at 1.5%.

But the euro's gains were limited after Trichet said the risks to the euro zone economy "remain to the downside in an environment of particularly high uncertainty."

Elsewhere, the U.S. Department of Labor said that initial jobless claims rose less-than expected to 401K last week, from an upwardly revised 395K the previous week.

Analysts had expected jobless claims to rise by 411K last week.

Meanwhile, the euro was sharply higher against the pound with EUR/GBP climbing 0.90%, to trade at 0.8713.

Earlier Thursday, the Bank of England decided to increase the bank’s asset purchase program by GBP75 billion, to GBP275 billion to shore up the U.K. economy.