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The euro advanced on Tuesday as sluggish worries over Italian debt boosted the single currency for a second day, while forex market movements were limited, investors worried about the upcoming developments of the Sino-US trade dispute.
Sterling was the main driver elsewhere, rising to a new five-week high above $ 1.30 after comments from the chief negotiator of the European Union on the prospects for an agreement of Brexit Monday supported the demand for the pound.
Markets remain nervous about any US move to impose new taxes on Chinese products in a context of increased tension between the two economic giants and after falling prices of emerging market assets in the early hours of European trading.
The euro was however supported by lower Italian government borrowing costs this week after Economics Minister, Giovanni Tria, announced Monday that yields would come down, with the government introducing its Highly anticipated budget for 2019.
The euro rose 0.4% to 1.16444 dollar, while the dollar index fell 0.3 percent to 94.895, close to its lowest since late August.
"There seems to be a sense of caution about emerging markets, a relief following positive comments by the Italian Finance Ministry on the Italian budget deficit and public debt, concerns over new US tariffs on products Chinese ECB meeting Thursday, "said Antje Praefcke, an analyst at Commerzbank.
Policy makers at the European Central Bank should largely leave their political parameters unchanged on Thursday.
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