Forexpros - The euro jumped to a three-week high against the U.S. dollar on Wednesday, erasing earlier losses, amid speculation the European Central Bank was purchasing Spanish and Italian sovereign debt.
EUR/USD pulled back from 1.4324 during European afternoon trade, a two-day low to hit 1.4490, the highest since July 27; the pair subsequently consolidated at 1.4478, up 0.49% on the day.
The pair was likely to find support at 1.4250, the low of August 15 and short-term resistance at 1.4535, the high of July 27.
The euro found support as speculation grew that the European Central Bank was buying Italian and Spanish government debt, in an effort to ease pressure on the region's third and fourth largest economies.
Last week, the ECB said that it purchased EUR22 billion worth of Italian and Spanish sovereign debt. The amount exceeded purchases made by the ECB in May 2010, when it first launched emergency purchases of Greek bonds. Then, it bought EUR16.5 billion.
The single currency was pressured earlier after Tuesday's meeting between German Chancellor Angela Merkel and French President Nicolas Sarkozy failed to ease concerns over the euro zone's ongoing sovereign debt crisis.
The two leaders proposed a new council to improve the governance of the euro zone and planned to introduce a financial transaction tax in September.
But they fell short of increasing the region's bailout fund, which many feel is inadequate should the debt crisis spread to Italy, Spain or France.
They also rejected issuing euro bonds, saying that the bonds will not solve the single currency bloc's debt issues, disappointing investors who had been anticipating such an action.
Also Wednesday, official data showed that consumer price inflation in the euro zone held steady at 2.5% in July, while core CPI rose 1.2%.
Elsewhere, the euro was also higher against the pound, with EUR/GBP climbing 0.38% to hit 0.8787.
Later in the day, the U.S. was to publish official data on producer price inflation, as well as government data on crude oil stockpiles.