Euro Rebounds From Near 3-Week Low On Short Covering

The single currency ended the day a little higher against the dollar on Wednesday after recovering from a near 3-week low on increased optimism surrounding Italy's political crisis.

Despite trading sideways in Asia, the single currency fell briefly but sharply to an intra-day low at 1.2954 in European morning after data showed Germany's business sentiment dropped for a second month in April, increasing concerns about an interest rate cut by the ECB. However, euro quickly pared intra-day losses on talk of buying by Asian central bank and rebounded to session high at 1.3034 in European morning before falling again to 1.2974 in New York morning. Later, price recovered to 1.3029 in New York afternoon on hopes that Italy can resolve its political gridlock.

Germany's Ifo business climate is released at 104.4, worse than the forecast of 106.2; Germany Ifo current conditions came in at 107.2, weaker than the expectation of 109.5.

Versus the Japanese yen. although the greenback rose to an intra-day high at 99.77 at Asian open, dollar pared intra-day gains and retreated to session low at 99.18 in Asian morning. Price staged a rebound to 99.67 in European morning, however, dollar met renewed selling interest there and dropped to 99.24 in New York morning due to the release of weaker-than-expected U.S. durable sales data before stabilising.

U.S durable good in Mar came in at -5.7%, weaker than the forecast -2.8%.

The British pound strengthened in Asian session and rose to an intra-day high at 1.5288 in European morning as Bank of England's decision to extend its program to provide cheaper loans to companies and consumers by one year revived hopes of an economic recovery in the country. However, cable pared intra-day gains and retreated to 1.5245 at New York midday before stabilising.

In other news, ECB's Constancio said 'Monetary policy is accommodative; Mon Pol will continue to be accommodative to respond to present situation where inflation is going down significantly.' Ifo economist Wohlrabe said 'German economy would grow more strongly in Q2 than in Q1 despite Ifo decline.'

On the data front, U.S durable good ex-transport is released -1.4%, worse than the expectation of -0.7%; U.S. durable good ex-defense came in at -4.7%, worse than the forecast of -2.3%. U.K. BBA mortgage approval in Mar came in at 31.2K, vs forecast of 31.4K.

Data to be released on Thursday :

U.K. GDP and U.S. weekly jobless claims.