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Forex - EUR/USD pares losses after Italian bond auction

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Forexpros - The euro pared losses against the U.S. dollar on Wednesday, easing off the daily low after a well-received Italian bond auction helped ease concerns over the region's debt crisis.

EUR/USD pulled back from 1.4309, the daily low, to hit 1.4352 during European afternoon trade, still down 0.16% on the day.

The pair was likely to find support at 1.4054, the low of August 5 and a two-week low and short-term resistance at 1.4425, the high of August 8.

Italy sold a total of EUR6.5 billion of bonds at a lower yield from the previous sale, indicating that financial pressures on the country may be easing in the wake of the European Central Bank's decision to buy its bonds.

The region's third largest economy saw borrowing costs on its 12-month bonds fall to 2.9% from 3.67% a month ago. Demand was 1.94 times the amount on offer, compared with 1.55 times last month.

Meanwhile, French President Nicolas Sarkozy met with Bank of France Governor Christian Noyer earlier in the day, as well as with a number of government ministers to discuss the country's economic and financial situation.

The meeting comes amid mounting concerns that France's top-tier AAA credit rating could be downgraded if the euro zone sovereign debt crisis worsened.

Elsewhere, the Federal Reserve pledged on Tuesday to keep its benchmark interest rate at an all-time low, adding that it will maintain a loose monetary policy until "at least through mid-2013."

In a statement, the Fed said growth was much slower than expected and the labor market had deteriorated, underlining concerns over the U.S. economic outlook.

The Fed also indicated that it "discussed the range of policy tools available to promote a strong economic outlook recovery in a context of price stability" and said it was prepared to employ the tools "as appropriate".

Minutes of the Fed's meeting will be published on August 30 and will provide more insight into the policy debate.

Meanwhile, the euro was higher against the pound, with EUR/GBP gaining 0.35% to hit 0.8841.

Later in the day, the U.S. was to produce data on the federal budget balance as well as reports on crude oil stockpiles and wholesale inventories.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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