Euro Edges Higher as FOMC Looms

By: Barbara Zigah

The Euro edged higher against the U.S. Dollar in Asian trading, boosted by a return to risk appetite following a series of successful sovereign debt auctions from Spain, Italy and the Netherlands. As reported at 12:29 p.m. (JST) in Tokyo, the Euro was trading at $1.3196, a 3-week peak and moving off the low off $1.3145 struck during the previous trading session; analysts say that immediate resistance is at $1.3225, the high of last week. Whether or not it edges higher will depend to a great extent on the outcome of the 2-day meeting of the U.S. Federal Reserve Bank.

The Fed’s FOMC will conclude their meeting today and announce any chances to monetary policy. Markets are keen to hear whether the earlier commitment to hold interest rates at the ultra low rate will continue to be upheld in light of the improvement to the U.S. economy. Too, investors will want to know whether the Fed’s Operation Twist program is to be abandoned at its conclusion in June; while the Fed may choose not to comment at this time, analysts caution that that will ratchet up the uncertainty and could make for a very volatile EUR/USD. Ahead of the announcement, trading in the pair is expected to be somewhat restrained, but on the whole most analysts are not forecasting any major policy change at this time.