Euro remains moderately higher vs. dollar, as hopes for progress on the Ukrainian front supported market sentiment, although growing expectations for fresh easing measures by the European Central Bank limited gains.
EUR/USD reached session highs of 1.3160 before pulling back to 1.3145, holding above Tuesday’s one year lows of 1.3109.
The pair was likely to find support at the 1.31 level and resistance at around 1.3160.
The euro held steady the yen, with EUR/JPY at 138.03, off Tuesday’s six-week highs of 138.24. Elsewhere, the dollar was little changed against the yen, with USD/JPY trading at 105.00, not far from Tuesday’s eight-month highs of 105.30.
The euro found some support after Ukraine's President Petro Poroshenko said he had agreed on a "permanent ceasefire" in eastern Ukraine with Russia.
In recent weeks the single currency was pressured over concerns that sanctions against Russia would act as a drag on growth in the euro zone.
But the euro failed to build on gains as investors remained cautious ahead of the ECB’s monthly meeting on Thursday.
On Tuesday the euro hit one year lows against the dollar due to mounting expectations that the ECB will announce quantitative easing measures as a way to shore up growth after the annual rate of euro area inflation slowed to a five year low last month.
Data on Wednesday showed that activity in the German and French service sectors slowed in August, while Italy’s service sector contracted, adding to pressure on the bank to act.
A separate report showed that euro zone retail sales fell 0.4% in July, in line with forecasts.
Meanwhile, demand for the dollar remained supported after robust U.S. factory data on Tuesday added to the view that the economic recovery is gaining momentum.
Expectations that the Federal Reserve is growing closer to raising interest rates have boosted the dollar against the euro and the yen, as the European and Japanese central banks look likely to stick to a looser monetary policy stance.
Investors were looking ahead to the latest U.S. employment report, due for release on Friday, for further indications on the strength of the recovery in the labor market, a key factor in deciding the future path of monetary policy.
Later in the day, the U.S. was to publish data on factory orders.
