EUR/USD rose today after an EU official hinted at willingness to soften the austerity measures imposed on Greece, in order to reflect the country's worsening economy.
Increasing expectations that the Fed will announce further monetary stimulus also helped the euro gain ground against the dollar. In Brussels on Tuesday, an anonymous EU official said that Greece's economic difficulties made meeting its current austerity targets very difficult, and argued that the bailout terms needed to be renegotiated - while still maintaining the original objective of reducing Greek debt to a sustainable level. The Federal Reserve will announce whether it is has decided to introduce additional easing measures after it concludes its two-day meeting today.
The Fed is widely expected to expand the Operation Twist programme beyond $400 billion to stimulate the US economy, rather than opening another round of quantitative easing. Operation Twist involves the Fed buying longer-dated securities and replacing them with short-dated government debt.
In Greece, coalition talks between New Democracy leader Antonis Samaras, Pasok leader Evangelos Venizelos and the Democratic Left have resumed, with optimism that there could be a government as early as midday boosting the euro.