The euro remained under broad pressure as the Federal Reserve held rates and French fiscal worries lingered. The euro also faced headwinds ahead of Thursday's European Central Bank meeting, while the dollar edged higher.
The euro remained under broad pressure as it struggled to recover, with political and fiscal risks in France tempering relief from Moody's decision to avoid a credit downgrade. Meanwhile, the dollar edged higher on Wednesday after the Fed held interest rates steady.
Fed holds, but keeps the door open
The Fed kept its benchmark rate in the 3.75%-4.00% range in a 10-2 vote, with two policymakers favouring a quarter-percentage-point increase. The central bank said inflation remained elevated, and it did not signal that it had ruled out further increases.
The dollar had reached a two-week high of 102.40 on Tuesday on the dollar index. The U.S. 10-year Treasury yield had also climbed above 5%.
French deficit and ECB weigh on the euro
Trading desks stayed guarded over Paris's widening 5.4% GDP deficit and prolonged street demonstrations against planned public spending cuts. Both kept the French 10-year risk premium over German Bunds historically wide.
Thursday's ECB Governing Council meeting adds to the headwinds. Frankfurt is widely anticipated to leave its deposit facility rate steady at 2.5% after tightening in June and September. However, inflation of 3.8% and elevated sovereign bond yields across the periphery leave policymakers navigating a difficult policy path.
Source: Investing.com
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