EUR shows signs of recovery from 12 year lows and all attention is on FED meeting this week.
The poor data from U.S. and nerves ahead of this week's Federal Reserve policy meeting weakened the dollar's rally and gave euro the strength to pull out from 12-year lows.
The euro traded steady at $1.0558 on Tuesday early morning and then jumped up to $1.0614 at 7.30 am GMT then dropped to $1.0571 and currently, EURUSD is back up at $1.0605.
On Monday, last week, the European Central Bank activated its 1 trillion euro bond-buying quantitative easing scheme, and drove euro zone bond yields to record lows. The common currency has been under pressure since then. The relief came with weaker-than-expected U.S. manufacturing, industrial output and housing data that came out on Monday and pushed down U.S. debt yields and cooled the dollar's rally.
A week after the ECB began printing money to buy sovereign bonds, Draghi said the bank's stimulus was helping the growth in the 19-country union.
"We are meeting against the backdrop of a steadily recovering economic situation in the euro area," he said in the speech for delivery at a finance conference. Draghi added that "most indicators suggest a sustained recovery is taking hold. Confidence among firms and consumers is rising. Growth forecasts have been revised upwards. And bank lending is improving on both the demand and supply sides."
The Federal Reserve policy meeting is scheduled for Tuesday and Wednesday this week and the traders watch the markets get a little nervous.
There are more and more expectations that the Fed will drop the word "patient" from its announcement on the scheduling of interest rate increases and as a result there are high prospects of interest rate hike as early as June which gave USD the strength it was showing off recently.
The dollar index has dropped from a 12-year high above 100.00 mark that it hit late last week and currently trading at 99.84.
MT4 GRAPH: EURUSD
MT4 GRAPH: DollarIndex
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