Investing.com - The dollar rose against the euro on Wednesday as investors remained in standby mode ahead of the Federal Reserve''s announcement on monetary policy and interest rates later in the session.
The dollar saw support on expectations for the Fed to trim $10 billion from its $65 billion monthly bond-buying program.
Fed bond purchases keep the dollar weak by suppressing interest rates to spur recovery by boosting stocks in hopes investing and hiring ensue, though talk of less monetary stimulus often firms the greenback.
In U.S. trading, EUR/USD was down 0.14% at 1.3914, up from a session low of 1.3900 and off a high of 1.3935.
The pair was likely to find support at 1.3880, Tuesday''s low, and resistance at 1.3948, Monday''s high.
Expectations that the Federal Reserve will see a need to continue tapering monthly bond purchases bolstered the dollar on Wednesday.
Disappointing economic indicators this year have frayed nerves at times, though consensus has remained that rough winter weather disrupted commerce and softened data through overall, the economy continues to recover.
Data released on Tuesday painted a picture of a U.S. economy still battling headwinds but at the same is still improving and in need of less monetary support.
The Labor Department on Tuesday reported that the U.S. consumer price index slowed to 1.1% in February from 1.6% in January. Analysts had expected the annual inflation rate to decline to 1.2%.
Month-on-month, U.S. consumer prices rose 0.1% in February, in line with forecasts.
Core inflation rates, which are stripped of volatile food and energy prices, rose 1.6% on year and 0.1% month-on-month, both figures in line with market forecasts.
The Federal Reserve plays close attention to core inflation rates when deciding on monetary policy.
Separately, the Commerce Department reported that the number of building permits issued in the U.S. rose to a four-month high in February, rebounding after a sharp drop in January.
The number of building permits issued last month jumped 7.7% to 1.018 million units, beating market calls for a 1.6% increase..
U.S. housing starts, however, fell 0.2% last month to hit a seasonally adjusted 907,000 units, disappointing expectations for an increase of 3.4% to 910,000 units.
The euro was down against the pound, with EUR/GBP down 0.38% to 0.8366, and down against the yen, with EUR/JPY unchanged at 141.33.
The pound firmed against most major currencies after the Office for National Statistics reported that the U.K. unemployment rate remained unchanged at 7.2% in the three months to January, in line with expectations.
In addition, the number of people claiming unemployment benefits fell by 34,600 last month, beating expectations for a decline of 25,000. January’s figure was revised to a drop of 33,900 people from a previously reported decline of 27,600.
Last month, the Bank of England updated its forward guidance on interest rates, after the unemployment rate fell more quickly than expected towards the 7% level it set as a threshold for considering rate hikes.
Separately, the minutes of the BoE’s March meeting indicated that the economic recovery in the U.K. is broadening, but still has some way to go before it is sustainable. The minutes also noted differences between officials over how much slack there is in Britain''s labor market.
The minutes showed that the monetary policy committee voted unanimously to keep interest rates at a record low 0.5% this month.
On Thursday, E.U. political leaders and finance ministers are to hold the first day of an economic summit in Brussels.
The U.S. is to publish the weekly report on initial jobless claims, as well as data on existing home sales and manufacturing activity in the Philadelphia region.