Investing.com - The euro rallied against the U.S. dollar Wednesday, as the European Central Bank has been reported to have proposed the Monetary Outright Transactions plan which involves unlimited purchases of government debt without a public cap on yields.
EUR/USD hit 1.2623 during U.S trade, the session high; the pair subsequently consolidated at 1.2603, gaining 0.29%.
The pair was likely to find support at 1.2500, the session low and near-term resistance at 1.2636, the high of August 31and a two-month high.
Launching the single currency rally, Bloomberg reported that the ECB is planning "unlimited, sterilized" bond buying, without setting bond yield targets. The plan called, the Monetary Outright Transaction proposal, is reported to be focused on government bonds with maturities of up to three years.
The ECB declined to either confirm or decline the report
The euro has been supported recently by expectations that the ECB is set to announce more details of measures to help stabilize the region’s sovereign debt markets after its policy meeting on Thursday.
Pressuring the single currency, a report showing that service sector activity in the euro zone contracted at a slightly faster rate than initially estimated in August added to fears that the bloc is set to enter a technical recession in the third quarter.
Markit said that its revised services purchasing managers’ index ticked down to 47.2 in August from a preliminary reading of 47.5, defying expectations to remain unchanged.
Germany's services sector contracted at its fastest rate in three years, with the PMI coming in at 48.3.
A separate report showed that retail sales in the bloc fell 0.2% in July, in line with expectations, bringing the annualized rate of decline to 1.7%.
The euro gained ground against the pound and the yen, with EUR/GBP easing up 0.07% to 0.7924 and EUR/JPY rising 0.18% to 98.75.
In other news Wednesday, Germany's Finance Minister Wolfgang Schäuble said the euro zone would be more stable in 2013 and added that the bloc would still exist in the same form as it does now.