LONDON (AFX) - The euro was little changed from morning levels as the market tries to digest the lack of a decisive majority after yesterday's Italian election and looks ahead to the U.S. Federal Reserve's open market committee's meeting tomorrow, dealers said. "The euro has stabilised," David Bloom, a currency strategist at HSBC, said.
"People are looking at the Italian election and what it means. People thought (prime minister-designate Silvio) Berlusconi would lose the upper house which would have been euro positive, but it looks as if he's won it all," he added.
Bloom said Berlusconi's fiscal policies such as large tax cuts, would bring him into conflict with the European Commission. "The loss of the upper house would have meant less conflict with Europe, boosting the euro," Bloom said.
Steve Hannah, chief economist at National Australia Bank, said trading in the euro was quiet with people reluctant to take it lower ahead of a possible move by the Federal Reserve to a neutral bias after recent strong economic data, from its current downward bias. Sterling was also steadying at slightly higher levels in quiet trade with this morning's producer price data having little impact. "There is nothing going on. Producer price figures were in line with expectations. The market will be quiet ahead of the FOMC meeting tomorrow," Hannah at National Australia Bank said.