EUR/USD slightly higher ahead of Federal Reserve minutes

The euro was trading slightly higher against the US dollar on Tuesday, as uncertainty over the future of Feds stimulus program continued.

EUR/USD reached its highest point today at 1.3355 at 5:15 GMT, after which consolidation followed at 1.3343. Support was likely to be found at August 16th low, 1.3310, while resistance was to be encountered at August 16th high, 1.3376.

The single currency preserved its positions against the greenback, trading above 1.3300, after it became clear that economy in the Euro zone returned to growth during the second quarter of the year, ending an 18-month recessionary period.

“Euro strength has coincided with the first quarter of positive growth in six quarters,” said Andrew Salter, a currency strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney, cited by Bloomberg. There were “some signs growth is starting to stabilize.”

Yesterday the euro advanced against the greenback after Germany’s Bundesbank said that the European Central Bank’s (ECB) forward guidance on interest rates in July was not an “unconditional commitment”. However, the report by the German central bank added that ECB’s pledge to maintain interest rates at low levels for an extended period would continue depending on the intermediate-term inflation outlook.

At the same time, traders raised their expected increase in the ECB’s benchmark interest rate over the next year to 23 basis points on Monday, close to the 26-basis-point level on August 15th, that was also the highest since June 25th, according to a Credit Suisse AG index based on swaps, Bloomberg imparted.

Additionally, today it became clear that Germanys Producer Price Index (PPI) ticked down 0.1% in July on a monthly basis, but advanced 0.5% during the same month on annual basis, as both results were below expectations of a 0.2% gain and 0.7% gain respectively. This drop reflected mostly the decrease in prices of products used in manufacturing, as they fell 1% in July 2013 compared to July 2012. Energy prices rose by 0.5%, while prices of non-durable consumer goods increased by 2.9% in July annually.

Meanwhile, market players awaited the release of the minutes of Federal Reserve Bank’s July meeting, scheduled on Wednesday, as it may provide clues on when the central bank may begin tapering its stimulus program. Policymakers will probably begin to pare back the central bank’s bond-buying program in September. These expectations were strengthened after on August 15th a report said that the weekly initial jobless claims in the United States decreased in number to their lowest in almost six years.

Elsewhere, the euro was slightly gaining against the sterling, with EUR/GBP cross up by 0.06% to trade at 0.8528 at 7:12 GMT. On the other hand, the euro retreated versus the Japanese yen, as EUR/JPY pair fell 0.30% to trade at 129.73 at 7:12 GMT.