NEW YORK (Dow Jones)--The euro traded just below $1.37 Wednesday morning in New York as market participants avoided any big moves before the Federal Reserve's interest-rate decision later in the day.
The euro has come off its highs of the morning and is now trading close to flat on the day.
Analysts said the primary focus Wednesday is now the Fed's statement and the euro-dollar trade could be range-bound until investors react to the announcement.
Market participants will scour the statement for clues about the health of the economy. A more optimistic tone about economic activity could help the dollar end its recent slide.
That said, there is little expectation the Fed will alter its controversial quantitative easing program, which expires in June. The U.S. central bank is expected to hold rates steady.
Paresh Upadhyaya, director of G10 FX global strategy at Bank of America-Merrill Lynch, said there are three possible changes to the statement that could be dollar positive. The dollar would likely get the most support if the Fed adjusts its language on inflation and steps further away from saying deflation remains a risk, he said.
Any acknowledgement of the drop in the unemployment rate last month or rising consumption would also be dollar positive, Upadhyaya said.
The euro initially rose in the global day, getting a lift from U.S. President Barack Obama's calls for a freeze of non-defense discretionary spending for five years. The move could help cut a projected $400 billion from future budget deficits, but analysts said the fiscal restraint might force monetary policy to remain loose for a longer period of time.
"The prospects of marginally tighter fiscal policy suggest that monetary policy may have to stay loose for slightly longer, which is [dollar] negative," Chris Turner, head of foreign exchange strategy for ING in London wrote in a research note.
The euro was at $1.3661 in New York trading, from $1.3682 late Tuesday, according to EBS via CQG. It had risen to $1.3723 earlier in the day, which was its highest level since Nov. 22.
The dollar was at Y82.19, from Y82.25, while the euro was at Y112.27 from Y112.58.
The U.K. pound clawed back some of its previous day's losses against the dollar and euro. The pound was pummeled Tuesday after a report surprisingly showed the country's economy contracted in the fourth quarter.
The U.K. pound was at $1.5860 from $1.5827 late Tuesday. The euro was at GBP0.8618 after hitting an 11-week high earlier.
-By Stephen L. Bernard, Dow Jones Newswires; 212-416-4528; stephen.bernard@dowjones.com
The euro has come off its highs of the morning and is now trading close to flat on the day.
Analysts said the primary focus Wednesday is now the Fed's statement and the euro-dollar trade could be range-bound until investors react to the announcement.
Market participants will scour the statement for clues about the health of the economy. A more optimistic tone about economic activity could help the dollar end its recent slide.
That said, there is little expectation the Fed will alter its controversial quantitative easing program, which expires in June. The U.S. central bank is expected to hold rates steady.
Paresh Upadhyaya, director of G10 FX global strategy at Bank of America-Merrill Lynch, said there are three possible changes to the statement that could be dollar positive. The dollar would likely get the most support if the Fed adjusts its language on inflation and steps further away from saying deflation remains a risk, he said.
Any acknowledgement of the drop in the unemployment rate last month or rising consumption would also be dollar positive, Upadhyaya said.
The euro initially rose in the global day, getting a lift from U.S. President Barack Obama's calls for a freeze of non-defense discretionary spending for five years. The move could help cut a projected $400 billion from future budget deficits, but analysts said the fiscal restraint might force monetary policy to remain loose for a longer period of time.
"The prospects of marginally tighter fiscal policy suggest that monetary policy may have to stay loose for slightly longer, which is [dollar] negative," Chris Turner, head of foreign exchange strategy for ING in London wrote in a research note.
The euro was at $1.3661 in New York trading, from $1.3682 late Tuesday, according to EBS via CQG. It had risen to $1.3723 earlier in the day, which was its highest level since Nov. 22.
The dollar was at Y82.19, from Y82.25, while the euro was at Y112.27 from Y112.58.
The U.K. pound clawed back some of its previous day's losses against the dollar and euro. The pound was pummeled Tuesday after a report surprisingly showed the country's economy contracted in the fourth quarter.
The U.K. pound was at $1.5860 from $1.5827 late Tuesday. The euro was at GBP0.8618 after hitting an 11-week high earlier.
-By Stephen L. Bernard, Dow Jones Newswires; 212-416-4528; stephen.bernard@dowjones.com
NICE GREEN LEAVES TO MUNCH ON.
