Pending home sales in the U.S., meanwhile, came in softer than expected, though the figure was still high in the eyes of most investors.
In U.S. trading on Wednesday, EUR/USD was down 0.65% at 1.2777.
In Italy earlier, the head of the center-left alliance, Pier Luigi Bersani, ruled out forming a coalition.
Election results in February resulted in a political deadlock in the Senate, fueling fears that the leadership stalemate may drag on and undermine economic reforms.
Investors, meanwhile, took note.
Italy’s Treasury earlier sold a total of EUR6.91 billion in 5- and 10-year government bonds, within the targeted range of EUR5-7 billion.
Italy auctioned EUR3 billion in 10-year government bonds at an average yield of 4.66%, down from 4.83% at a similar auction last month, though turnout was light.
Rome also sold EUR3.91 billion in five-year bonds at an average yield of 3.65%, up from 3.59% in a February auction.
Yields in secondary markets rose, however, as investors priced in political uncertainty.
Economic indicators on both sides of the Atlantic supported the dollar over the single currency.
The European Commission reported earlier that its eurozone Economic Sentiment Indicator fell to 90.0 in March from 91.1 in February.
Analysts were expecting the index to fall to 90.4 last month.
Meanwhile in the U.S., the National Association of Realtors reported that its pending home sales index slipped 0.4% in February, beyond analysts' calls for a drop of 0.2% though the number still remained at its second-highest level in three years.
Improving U.S. economic indicators have fueled dollar demand lately by fanning sentiments that the Federal Reserve may soon wind down monetary stimulus programs, which weaken the greenback to spur recovery.
The greenback, meanwhile, was up against the pound, with GBP/USD trading down 0.22% at 1.5126.
Official data released Wednesday revealed that the U.K. economy contracted by 0.3% in the three months to December, in line with preliminary estimates and analysts’ forecasts.
Growth for all of 2012 was revised down to 0.2% from a preliminary estimate for 0.3% expansion.
The dollar was flat against the yen, with USD/JPY unchanged at 94.44, and up against the Swiss franc, with USD/CHF trading up 0.60% at 0.9536.
The dollar was up against its counterparts in Canada, Australia and New Zealand, with USD/CAD up 0.03% at 1.0164, AUD/USD down 0.38% at 1.0446 and NZD/USD trading down 0.29% at 0.8368.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.44% at 83.40.