Euro Declines Ahead Of Fed Statement

The euro was steady at $1.2466 on Wednesday morning as the Federal Reserve began its final day of meetings before making a policy statement. The common currency remained under pressure as data from the region continued to suggest that the European Central Bank will likely move in the opposite direction of the Fed come 2015.

The U.S. Federal Reserve is expected to sound less dovish in this month’s policy statement as the nation’s economy has been improving and the possibility of a rate hike becomes more and more likely. The bank is widely expected to keep U.S. monetary policy constant, but to insinuate that a rate increase is coming in the near-term. At previous meetings, the bank has pledged to keep rates low for a "considerable time," but at this week’s meeting investors believe the bank will take that phrase out of its policy statement.

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Meanwhile the European Central Bank may move in the opposite direction early next year as the bloc’s economic struggles worsen. On Tuesday, Reuters reported that Markit’s Composite Flash PMI reading for the region came in ahead of forecasts, but still suggested that eurozone businesses are continuing to struggle. The reading for December was 51.7, above the 50-point mark that separates expansion and contraction, but not by much. Also concerning was that in order to achieve that weak growth rate, businesses had to cut their prices for the 33rd consecutive month.

Moving forward all eyes will be on Greece, where parliament will vote on whether to back current Prime Minister Antonis Samaras or a leftist party that has vowed to exit the nation’s bailout package. If Samaras’ presidential candidate is not chosen, the nation could hold snap elections in January.

Posted In: NewsEurozoneCommoditiesForexGlobalFederal ReserveMarkets
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