The euro retreated from its early highs against its major rivals in European deals on Wednesday, as German bunds advanced, pushing yields down, ahead of the much awaited FOMC decision later in the day.
The benchmark 10-year German bond yield fell 0.64 percent, while that of 20-year note was down by 1.28 percent.
The Federal Reserve ends its 2-day meeting at 2:00 pm ET, with consensus for a 0.50 percent hike in fed funds rate. It is widely expected that the Fed would signal it foresees a slow and gradual series of rate hikes depending on incoming data.
Final data from Eurostat showed that inflation rose to 0.2 percent in November from 0.1 percent in October. The annual rate for November was revised up from 0.1 percent.
This was the second consecutive rise in consumer prices. Headline inflation has been below the European Central Bank’s target of ‘below, but close to 2 percent’ since early 2013.
Separate data showed that Eurozone trade surplus held steady in October, defying economists’ expectations for an increase.
The seasonally adjusted trade surplus came in at EUR 19.9 billion in October, same as in the previous month. Meanwhile, economists had expected the surplus to climb to EUR 20.6 billion.
The euro has been trading almost flat against the greenback since December 3, after the European Central Bank stunned markets by delivering less stimulus than what had expected.
The euro showed mixed performance in the Asian session today. While the euro held steady against the pound and the franc, it rose against the greenback and the yen.
The euro eased back to 1.0915 against the greenback, following a high of 1.0959 hit at 2:15 am ET. The next possible support for the euro-greenback pair is seen around the 1.08 zone.
The single currency, having advanced to 133.50 against the Japanese yen at 2:30 am ET, pared some its gains with the pair trading at 133.23. At yesterday’s close, the pair was worth 132.94.
Flash survey from Markit Economics showed that Japan’s manufacturing activity continued to expand strongly in December, though at a slightly slower pace than in the previous month.
The Markit/ Nikkei Manufacturing Purchasing Managers’ Index, or PMI, fell to 52.5 in December from 52.6 in November.
Although the euro rebounded to 0.7290 against the pound in European morning deals, it retreated in a short while. The pair was trading at 0.7275, compared to Tuesday’s closing value of 0.7266. The euro is seen finding support around the 0.70 region.
Data the Office for National Statistics showed that the U.K. unemployment rate declined in three months to October and the employment rate hit a record high.
The ILO jobless rate came in at 5.2 percent in August to October period, which was below 5.3 percent seen in three months to September. It has not been lower since three months to January 2006, the ONS said.
The 19-nation currency edged down to 1.0805 against the Swiss franc, off its early high of 1.0838. On the downside, 1.07 is possibly seen as the next support level for the euro.
The single currency reversed from its early highs of 1.5232 against the aussie and 1.5070 against the loonie, trading lower at 1.5177 and 1.5017, respectively. On the downside, the euro is likely to find support around 1.50 against the aussie and 1.48 against the loonie.
Looking ahead, U.S. housing starts and industrial production, both for November, U.S. crude oil inventories data and Markit’s flash U.S. manufacturing PMI for December are slated for release in the New York session.
At 2:00 pm ET, the Federal Reserve will announce its decision on monetary policy. The Fed is expected to nudge up the Fed rates by 25 bp rate, to a range of 0.25-0.50 percent.
Following the announcement, Federal Reserve Chair Janet Yellen will hold the customary post-meeting press conference at 2:30 am ET.
The material has been provided by InstaForex Company – www.instaforex.com