Forexpros – The euro edged up to a fresh session high against the U.S. dollar on Tuesday, as concerns over the deepening crisis in the euro zone fuelled speculation that world central banks will act to support the global economy.
EUR/USD hit 1.2629 during European early afternoon trade, the session high; the pair subsequently consolidated at 1.2622, gaining 0.37%.
The Federal Reserve was to begin its two-day policy meeting later Tuesday, amid speculation over the possibility of a third round of easing from the central bank.
Elsewhere, an unexpected decline in U.K. inflation in May added to expectations for more quantitative easing from the Bank of England, as until now inflation has been easing more slowly than the bank had hoped.
Market sentiment was also buoyed by hopes that Greece’s New Democracy party will form a coalition government with the socialist Pasok party, which would allow Athens to resume negotiations with creditors on its international bailout deal.
Meanwhile, the yield on Spanish 10-year bonds eased back to 7.08% from a session high of 7.13%, but remained above the critical 7% threshold amid concerns that a EUR100 billion bailout agreed earlier this month may not be enough to overhaul the country’s ailing banking system.
Earlier Tuesday, Madrid saw short-term borrowing costs rise sharply at an auction of government bonds.
Elsewhere in the euro zone, a report showed that the ZEW index of economic sentiment in Germany tumbled to minus 16.9 in June from 10.8 the previous month, amid concerns over political instability in Greece and worries over sovereign debt contagion.
The euro was slightly higher against the pound and the yen, with EUR/GBP up 0.31% to hit 0.8052 and EUR/JPY edging up 0.12% to trade at 99.61.
Later in the day, the U.S. was to publish official data on building permits and housing starts. Elsewhere, leaders from the Group of 20 nations were to hold a second day of talks in Los Cabos, Mexico.