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Forex - EUR/USD at 4-month highs before Fed

Published 06/18/2013, 10:13 AM
Investing.com - The euro was trading at four-month highs against the dollar on Tuesday as markets looked ahead to the outcome of the Federal Reserve’s keenly anticipated policy setting meeting on Wednesday.

EUR/USD hit 1.3400 during U.S. morning trade, the pair’s highest since February 20; the pair subsequently consolidated at 1.3393, up 0.21% for the day.

The pair was likely to find support at 1.3325, the session low and resistance at 1.3434, the high of February 20.

Investors were looking ahead to the Fed’s rate statement and press conference on Wednesday amid uncertainty over the bank’s next move after Chairman Ben Bernanke said last month the bank could begin to taper asset purchases if the economy continued to improve.

Official data on Tuesday showed that U.S. consumer prices rose in line with expectations in May, giving the central bank leeway to continue its easing program.

The Labor Department said consumer price inflation rose 1.4% from a year earlier in May, in line with forecasts and up from 1.1% in April.
Core inflation, which excludes food and energy costs, rose 0.2% in May, also in line with expectations.

Consumer prices rose 0.1% in May from a month earlier, slightly below expectations for a 0.2% increase.

In a separate report, the Commerce Department said the number of building permits issued in the U.S. fell 3.1% in May to a seasonally adjusted 0.974 million, worse than expectations for a decline of 2.8% to 0.975 million units.

U.S. housing starts rose by 6.8% last month to hit a seasonally adjusted 0.914 million, below expectations for an increase of 11.4% to 0.950 million.

In the euro zone, a report showed that the ZEW index of German economic sentiment rose to 38.5 in June from May’s reading of 36.4. Analysts had expected the index to rise to 38.1.

The report said the German economy is likely to slowly pick up speed in the second half of this year.

The euro shrugged off comments by European Central Bank President Mario Draghi, who said Tuesday that the bank was ready to use interest rates and non-standard measures to shore up growth in the euro zone economy.

The single currency extended gains against the yen and the pound, with EUR/JPY advancing 1.20% to 127.82 and EUR/GBP rising 0.86% to 0.8575.

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