Investing.com -- EUR/USD rose modestly on Tuesday to continue its recent hot streak, as investors continued to digest dovish comments from an influential Federal Reserve policymaker on the increased possibility of a delayed interest rate hike from the U.S. central bank.
The currency pair traded in a broad range between 1.0815 and 1.094, before settling at 1.0918, up 0.0023 or 0.21% on the session. The euro has now closed higher against the dollar in each of the last two sessions and six of its last seven trading days. On the new year, however, the pair is still relatively flat, as the euro is up by roughly 0.50% against its American counterpart since January 1.
EUR/USD likely gained support at 1.0538, the low from December 3 and was met with resistance at 1.1496, the high from Oct. 15.
On Tuesday, investors continued to react to a closely watched speech by Fed vice chair Stanley Fischer on the possibility that the Federal Open Market Committee could delay its next interest rate hike beyond the first quarter. At an address before the Council of Foreign Relations in New York, Fischer noted that further declines in oil prices and a persistently strong dollar could suggest that inflation will remain lower than the Fed previously anticipated. Fischer eventually expects inflationary pressures to rise once temporary factors from the oil downturn and the appreciation of the dollar dissipate.
Inflation has remained under the Federal Open Market Committee's (FOMC) targeted objective of 2% for every month over the last three years.
The U.S. Department of Commerce said on Monday that its Core Price Consumption Expenditures (PCE) index gained 1.4% on an annual basis in December, up from 1.3% a month earlier. The Core PCE index, which strips out volatile food and energy prices, is the Federal Reserve's preferred gauge on inflation.
Fischer declined to comment on the timing of the Fed's next rate hike. Shortly after the FOMC abandoned a seven-year zero interest rate policy in December, the vice chair told CNBC that it could be appropriate to expect as many as four interest rate hikes in 2016. Last week, the FOMC left the target range of its benchmark Federal Funds Rate unchanged between 0.25 and 0.50%, citing volatility in global financial markets and reduced inflation expectations.
"The world is an uncertain place, and all monetary policymakers can really be sure of is that what will happen is often different from what we currently expect," Fischer said. "That is why the Committee has indicated that its policy decisions will be data dependent."
Esther George, Fischer's colleague on the FOMC, offered diverging viewpoints on Tuesday on the Fed's pace of tightening. George, the president of the Federal Reserve Bank of Kansas City, said at a speech in Missouri that she expects that the economy will improve later this year warranting further rate hikes in 2016. While George noted that the recent volatility in global financial markets was not unexpected, she added that the developments are also "not worrisome." George, a noted hawk, also described the Fed's December lift-off as a "late start" following the recovery of the U.S. economy and labor market.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell mildly to an intraday low of 98.79 before rallying to close at 98.97. The index remains near 12-month highs from December, when it eclipsed 100.00.
In Europe, investors reacted to a major sell-off in the financial sector, as a host of major banks fell sharply amid continued sovereign wealth redemptions due primarily to the prolonged oil rout. UBS Group AG (N:UBS) shares fell approximately 7% on worse than expected profits last quarter, while Banco Santander (N:SAN) and Deutsche Bank (DE:DBKGn) AG NA O.N. (N:DB) each plunged to its lowest level since the Financial Crisis.
Yields on the U.S. 10-Year fell more than 10 basis points to an intraday low of 1.847%, their lowest level in 10 months.