Euro Hangs In The Balance As Fed Meeting Gets Underway

Currency markets were subdued on Tuesday as the U.S. Federal Reserve meeting began and investors waited for big economic releases, due out later in the week.

The euro remained near an eight month low at $1.3429 at 7:00 GMT on Tuesday morning. The common currency’s strength will likely hinge on the outcome of the Fed’s two day meeting.

Most are expecting that the Fed will cut its bond buying program by a further $10 billion this month, but the question for investors is whether or not the bank will give any information about the timing of the bank’s interest rate hike.

Fed Chair Janet Yellen has said that the bank will stay its current course and won’t raise interest rates until economic data warrants. She said the bank would be closely watching the jobs market to determine whether or not interest rates can be increased early.

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However, according to Bloomberg, some analysts don't see the U.S. economy’s rebound living up to expectations. An analyst at BNP has said that he doesn’t see U.S. economic growth being as robust as investors have been expecting, something that could knock the dollar from its pedestal and give the euro a bit of a boost.

The euro has been languishing near $1.34 recently due to a lack of positive economic reports and the divergence in policy between the Fed and the European Central Bank.

The common currency has also been held down by the ongoing tension between Moscow and the West, as Russia is one of the bloc’s biggest trading partners. Despite their economic relationship, the EU respond to allegations that Russia is continuing to send arms to Ukrainian rebels by delivering stricter sanctions against Russia’s finance, defense and energy sectors.