Euro Steady Above $1.33 Ahead Of Fed Meeting
The euro traded steadily above $1.33 on Tuesday as Europe prepared for the US Federal Reserve's two day meeting.
Despite recent poor data, the common currency got a boost over the weekend when Lawrence Summers dropped out as a candidate for Federal Reserve Chairman. Summers was rumored to be President Obama's first choice to replace Ben Bernanke, however widespread criticism caused him to withdraw from the race.
The euro's gains from Summers' resignation are likely to be short lived, as more data from the eurozone on Monday signaled that the region was not yet out of the woods. Data showed that workers' pay within the bloc rose by less than the rate of inflation, which will put pressure on consumer spending. However some eurozone leaders see the falling wages as a good sign which signals growing competitiveness.
Mario Draghi spoke on Monday in Berlin about the dire need for a centralized banking union within the bloc, saying that the union would help support a faster recovery. A recent meeting of the minds between eurozone policy makers ended without any forward progress on the union, and with German Finance Minister Wolfgang Schaeuble claiming the current proposal violates the EU treaty.
Bloomberg reported that Draghi considers the eurozone's return to growth in the second quarter as fragile and “in its infancy”. He said that given the current conditions, the ECB will keep interest rates constant. In his opinion, the threat of a major breakdown has passed and now it is up to individual governments to address their budget gaps and fiscal health.
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