Investing.com -- EUR/USD posted modest gains on Monday after a pair of highly-respected Federal Reserve governors offered diverging viewpoints on whether rising inflation is close to reaching the U.S. central bank's objective, adding further confusion on the timing of its next interest rate hike.
The currency pair traded between 1.094 and 1.1025 before settling at 1.1012, up 0.0021 or 0.19% on the session. The euro has closed higher in three of the last four sessions against the dollar. Since falling to three-weeks lows at 1.0823 last week, the euro has rallied approximately 1.3% against its American counterpart.
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.
The euro pared earlier losses after Fed governor Lael Brainard clearly enumerated why the U.S. central bank should remain patient in raising short-term interest rates in a speech at a banking conference on Monday afternoon. Citing a lack of assurance that inflation is moving closer to the Fed's long-term target of 2%, Brainard indicated that she would be hesitant to approve further rate hikes until domestic prices showed further signs of firming.
"There's some troubling signs that inflation expectations have actually slipped downwards. That is a risk to the outlook that I'm looking at carefully," Brainard told CNBC. "We have strong cross currents from abroad. We have weak growth in the emerging economies, weak growth in Japan and the euro area and of course weakness coming over from China. There is some downside to the domestic outlook, so that's why I am very focused on preserving and protecting the progress we've made."
In a separate speech on Monday, Fed governor Stanley Fischer took an opposing view on the pace of inflationary gains, as persistently low oil prices have begun to rebound and a stronger dollar continues to level. In January the Core PCE Index, the Fed's preferred gauge on inflation, rose to 1.7% -- its highest level since February, 2013.
"We may well at present be seeing the first stirring of an increase in the inflation rate -- something that we would like to happen," Fischer said at a banking conference in Washington.
Investors continue to await a highly-anticipated meeting by the European Central Bank on Thursday, where the ECB's Governing Council is widely expected to approve a host of easing measures aimed at bolstering growth throughout the euro zone. When the central bank last met in January, it held its benchmark interest rate at a record-low of 0.05. At Thursday's meeting, the ECB could lower its deposit and margin facility rates, while increasing the scope of its €60 billion a month bond buying program.
The U.S. Dollar Index, which measures the strength of the greenback versus a basket of six other major currencies, fell more than 0.25% to an intraday low of 97.05, before settling at 97.12. The index is down more than 2% over the last two months of trading.
Yields on the U.S. 10-Year gained three basis points to 1.91%, while yields on the Germany 10-Year lost one basis point to 0.22%. Yields on both government bonds have fallen by at least 17 basis points over the last year.