EURUSD Rise Expected from Fed Decision

The U.S. Dollar came under broad pressure earlier in the Asian trading session with investors speculating that the greenback will once again be devalued as the U.S. central bank announces another round of stimulus later today. The Euro, meanwhile, was supported by unexpectedly stronger economic sentiment from Germany, the Eurozone’s powerhouse. Analysts expect that given the two scenarios, the EUR/USD pair is likely to rise in the near term. As reported at 11:34 a.m. (JST) in Tokyo, the EUR/USD was trading at $1.3000, well off a 2-week trough struck last Friday when the pair touched on $1.2876. The U.S. Dollar Index was also down about 0.5% in the week thus far, trading at 80.04 .DXY.

The U.S. Federal Reserve Bank concludes a 2-day rate setting meeting today, and markets are expecting that the Operation Twist program which is due to expire will likely be replaced instead with outright asset purchase plan that could be as high as about $45 billion a month. According to one currency strategist, however, markets don’t seem to have fully priced in just such an outcome so that outlook is for a rise in the pair. With the “fiscal cliff” looming, analysts believe that the Fed will take these preventative steps to bolster the economy.