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The euro resumed its upward trend on Wednesday, hitting a 14-month high against the dollar, following a rise in economic confidence.
The single currency rose above $1.35 against the dollar for the first time since December 2011 as it shrugged off a fall in Italian business confidence. The euro rose 0.3 per cent against the US dollar to $1.3537, after an economic sentiment indicator from the European Commission showed a better than expected rise in January.
The gains in the euro came ahead of an announcement by the US Federal Reserve expected later in the session at the conclusion of a two-day policy meeting, with investors waiting for any fresh sign on the Fed’s stance on monetary easing.
Markets were also waiting for the release of figures that were expected to show a slowdown in the pace of US economic growth, with gross domestic product for the fourth quarter of 2012 expected to rise 1.1 per cent on the previous year.
“We suspect that the Federal Open Market Committee statement released after the GDP figures will confirm that the Fed will continue with its quantitative easing programme for now but that it recognises that the economy is healing,” said analysts at Citigroup in a note.
“Risk correlated currencies and the euro-dollar could be vulnerable to potential hawkish Fed surprises tonight.”
The US dollar rose against most other major currencies, gaining 0.7 per cent against the Japanese yen to Y91.41 and 0.1 per cent against the Canadian dollar to $1.0026. The Australian dollar fell 0.3 per cent to $1.0436.
The pound recouped some of its earlier losses after the Bank of England said that mortgage approvals hit an 11-month high in December.
Sterling had hit a session low of $1.5726 against the dollar but was later just 0.1 per cent lower at $1.5747.
But the more positive signs on the UK economy did not help the value of the pound against the euro. Sterling was 0.4 per cent lower against the euro at €1.1641.
