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EUR/USD lower after FOMC minutes

eurodollarThe euro was trading lower against the US dollar on Thursday, following the release of the minutes of Federal Open Market Committee (FOMC) meeting on September 17th-18th, which revealed that most policymakers supported the idea of paring back the banks stimulus program this year.

EUR/USD slid to a session low at 1.3488 at 5:00 GMT, after which consolidation followed at 1.3499, down 0.17% for the day. Support was likely to be received at psychological level of 1.3400, while resistance was to be met at October 7th high, 1.3590.

The minutes of FOMC meeting said that most policymakers expressed their support of central banks intention to reduce the pace of its 85-billion-USD-per-month asset purchases this year. However, experts suggested that the bank will probably not make such a move at its meeting in October, as Chairman Ben Bernanke has not scheduled a press conference due to the partial US government shutdown. Most analysts expect that a possible scale back to Federal Reserve’s monetary stimulus could occur in December. “The FOMC minutes appear to have given a boost to the dollar as markets focus on the key headline that most FOMC members see tapering by the end of the year,” Vassili Serebriakov, a foreign-exchange strategist at BNP Paribas SA in New York, said in a phone interview, cited by Bloomberg News. “Positions against the dollar have been vulnerable for a while and are starting to unwind.”

At the same time, US President Barack Obama officially nominated Fed Vice Chairman Janet Yellen for the post of banks Chairman. Yellen will be the first lady to take such a position in central banks 100-year history. In a brief statement at the White house the US President, accompanied by both Ben Bernanke and Janet Yellen, urged the Senate to approve this nomination as quickly as possible, especially given the current economic challenges, which the US nation has recently confronted. On her part, Janet Yellen stressed that more needs to be done in order to provide support to economic recovery, despite the so far achieved progress.

Meanwhile, economists stated that European Central Banks (ECB) next move on monetary policy might not be a conventional one. About 75% of experts predict that ECB President Mario Draghi will unveil new liquidity measures, such as longer-term refinancing operations. However, the majority of respondents in a separate survey by Bloomberg said, that interest rates are likely to remain unchanged through the first half of 2015. In the survey of 43 experts on liquidity options, 74% said the ECB will unveil new measures, while 25 of the respondents said that a long-term refinancing operation is a probable instrument. In another survey of 46 economists, 89% said the central bank’s base interest rate will remain at the current record low level and the rest saying that it will be reduced by a quarter percentage point. The ECB has preserved expectations for higher interest rates, to a certain extent, by pledging in July to keep borrowing costs at a low level for an extended period, with no specific time frame set.

Elsewhere, the euro was steady against the sterling, as EUR/GBP cross dipped 0.04% on a daily basis to trade at 0.8475 at 7:45 GMT. EUR/JPY pair, on the other hand, was up 0.21% to trade at 131.95 at 7:46 GMT.

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