Investing.com -- EUR/USD posted modest gains, extending a rally from the previous two sessions, exhibiting little movement on Wednesday afternoon after the Federal Reserve held interest rates steady for a third consecutive meeting.
The currency pair traded between 1.1273 and 1.1361, before settling at 1.1326, up 0.24% on the session. With the gains, the euro closed above 1.13 for the first time in six sessions. Over the last month of trading, the euro is up by roughly 1.4% against its American counterpart. More broadly, the euro has rallied approximately 4.25% against the dollar over the first four months of the year.
In a relatively neutral April monetary policy statement, the Federal Open Market Committee left the target range on its benchmark Federal Funds Rate unchanged at a level between 0.25 and 0.50%. In December, the FOMC abandoned a seven-year zero interest rate policy by lifting the Fed Funds Rate by 25 basis points. It represented the first rate hike by the Fed in nearly a decade.
Moving forward, the FOMC said it will assess economic conditions, measures of labor market conditions, indications of inflationary pressures and expectations, as well as readings on financial and international developments as it determines the size of future adjustments to the Federal Funds Rate. Since the FOMC last met in March, the central bank noted that economic activity has slowed in recent weeks. In addition, the FOMC said while the housing sector has shown improvement since the start of the year, business fixed investment and net exports remain soft.
"The Committee expects that economic conditions will evolve in a manner that will warrant only gradual increases in the federal funds rate; the federal funds rate is likely to remain, for some time, below levels that are expected to prevail in the longer run," the FOMC said in the policy statement. "However, the actual path of the federal funds rate will depend on the economic outlook as informed by incoming data."
While the Fed has expressed optimism with continued improvements in the labor market, the U.S. central bank has remained concerned with sluggishly low inflation in recent months. As oil prices hover near multi-year lows and the dollar remains markedly above its 2014 levels, long-term inflation has fallen under the Fed's 2% objective in every month over the last three years. At the start of the year, however, there have been some signals that inflation is beginning to firm. In January, the Personal Consumption Expenditure (PCE) price index nearly doubled to 1.3%, hitting its highest level since the fall of 2014. The Core PCE Index, which strips out volatile food and energy prices, soared to 1.7%, its strongest annual gain since the end of 2012. The Core PCE Index, the Fed's preferred gauge for inflation, increased by 1.7% in both January and February. Further increases in inflation could compel the FOMC to lift interest rates in June.
Elsewhere, the National Association of Realtors said Wednesday morning that its pending home sales index rose 1.4% in March, above consensus estimates for a 0.5% increase. In the Northeast region, pending home sales are up 18.4% on a yearly basis, offsetting slowing growth in the Midwest. It came one month after the index surged 3.5% in February. The Federal Reserve Bank of Atlanta also increased its forecast for U.S. GDP in the first quarter by 0.2 to 0.6%, ahead of Thursday's latest estimate by the Department of Commerce. Analysts are expecting a reading of 0.7%.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, wavered throughout a volatile session before settling at 94.38, down 0.07%. The index remains near eight-month lows.
Any rate hikes by the Fed this year are viewed as bullish for the dollar, as investors pile into the greenback in order to capitalize on higher yields. Yields on the U.S. 10-Year fell seven basis points to 1.85%, halting an eight-day winning streak.