Euro Steady Above $1.27 Ahead Of Fed Meeting Conclusion

The euro was steady at $1.274 at 7:30 GMT on Wednesday with investors focused on the Federal Reserve’s monthly policy meeting, set to wrap up later in the day.

The common currency gained some strength this week after disappointing U.S. data and speculation that the Fed will take a dovish tone in its guidance following Wednesday’s meeting.

Most are expecting the bank to finish tapering its bond buying program on schedule despite some worrisome figures from the U.S. service sector.

However, to combat a sharp reaction from markets, the bank will probably reassure investors that interest rates will remain low for an extended period in order to support lackluster U.S. inflation and guard against influence from the struggling global economy.

Meanwhile some confidence was restored in the eurozone after the European Central Bank publicized the results of its stress tests over the weekend.

The results were inline with investors’ forecasts with just nine banks failing. Despite that, many are still wary as some isolated errors were discovered in the results, something that could diminish the tests’ credibility.

Related Link: Private Equity Loving The Shipping Industry

The euro also gained some momentum from news that the budget battle between the EU and France and Italy looked to have subsided after both nations agreed to revise their budgets and reduce their deficits.

The Wall Street Journal reported that though the budgets still fall short of the deficit targets agreed to previously, the European Union has decided against rejecting them.

Still, the European Commission could require Paris and Rome to implement tax increases or spending cuts in order to meet their targets, but the austerity measures needed would be minimal with the new revisions in place.