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Euro Under Pressure As Fed Meeting Begins

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The euro continued to be weighed down on Tuesday after consumer price data from the region confirmed that the bloc's inflation was an ongoing problem.

The common currency traded at $1.3562 at 6:30 GMT on Tuesday morning.

Reuters reported that telecommunication and food prices were to blame for the region's further slowdown with prices across the bloc rising just 0.5 percent annually in May. The figure is in what the European Central Bank has called the "danger zone" below one percent, and remains a far cry from the bank's two percent target.

The report confirmed what most were expecting, that this month's monetary policy changes were needed. The ECB is the first major central bank to use a negative deposit rate in order to boost lending and also announced plans for a cheap loans program which will reward banks for lending to companies.

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Bank President Mario Draghi also said he was willing to act again, leaving markets to wonder whether or not the ECB will roll out a quantitative easing program on par with the Federal Reserve or the Bank of England.

As the ECB becomes more accomodative, the Fed is moving in the opposite direction as it begins its two day policy meeting later on Tuesday. Many are expecting the bank to continue tapering its monthly asset purchases by $10 billion, but the focus will be on what is said at the press conference following the meeting.

Investors will be watching bank Chair Janet Yellen carefully for any hints about the timing of an interest rate hike. The euro will likely lose even more against the greenback as the two regions' monetary policies continue to diverge.

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

 

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