Forex News – Euro rebounds as focus shifts to US Fed policy meeting today

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The euro edged up in the European session moving off its three-week low from yesterday’s huge dip against the dollar following Greek Prime Minister’s announcement to hold a referendum on the Greek debt deal agreed on at the EU Summit last week. This sent the markets into turmoil and resulted in a large sell-off in the single currency and other risk assets.

Euro gained 1.3 percent against the dollar since the 1.3607 low reached yesterday and is currently trading at 1.3787 in the European session at 08:20 GMT.

As investors cover short positions following the euro’s worst two-day fall since May, this helps prop up the EURUSD.

The US Federal Reserve policy meeting is later today and the market focus will be shifting away from Europe temporarily which will give some respite to the euro. However this will be short term and depending on the outcome of the Fed’s policy-setting and whether it will signal further policy easing, this would affect market sentiment accordingly. If the news is negative from the Fed, this will hurt euro further as well as other risk assets as sentiment will turn sour again.

If risk appetite is dampened further, the Japanese yen risks strengthening to the discontent of the Bank of Japan, as safe haven demand will prop it up. Dollar will gain against risk currencies.