Market Overview

Euro Holds On Ahead Of Fed Meeting

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The euro held on to its strength as fears about immediate military action in Ukraine subsided and the US Federal Reserve Policy meeting got under way.

The common currency traded at $1.3908 at 7:00 GMT on Tuesday morning as investors looked to the Fed for further clues about the US' economic health.

Most expect the US central bank to continue tapering its monthly asset purchases by $10 billion despite recent disappointing economic indicators. US policy makers have largely shrugged off the nation's lackluster data, attributing it to the unusually severe winter.

See also: FDIC Sues Big Banks For Rigging Interest Rates

Investors are also interested in the bank's view on policy tightening, which is expected to be addressed on Wednesday at the close of the meeting. According to Bloomberg, Fed officials are expected to use less specific language to describe the conditions necessary for a rate cut. In the past, the bank used a 6.5 percent unemployment rate as a threshold for policy tightening.

However, now that the nation's unemployment rate has fallen to 6.7 percent, Fed officials have said they believe rates need to remain low for some time until the economy can stand on its own.

Meanwhile, eurozone policymakers continue to worry about the common currency's recent strength and its effect on consumer prices. European Central Bank President Mario Draghi indicated that the ECB may have to consider the currency's strength at its next policy meeting as it could potentially damage the region's recovery.

Even more concerning, the EU's statistics agency released a revised February inflation rate on Monday which showed the figure had dropped even further below the bank's two percent target. Although the report was concerning, most don't expect that figure alone to prompt the bank to ease further.

Posted-In: European Central BankNews Eurozone Forex Global Federal Reserve Pre-Market Outlook Markets Best of Benzinga

 

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