The Euro received a boost on Tuesday following a report signalling the European Central Bank (ECB) could soon begin talks on ways to remove excess liquidity in the banking system.

According to a Reuters news agency report involving comments from six sources, discussions regarding the surplus liquidity in banks would likely get underway in October.

The additional cash reduces the impact of the European Central Bank’s rate rises by lowering competition for deposits, resulting in substantial interest payments and subsequent losses by certain central banks.

The single currency increased by 0.4% on Monday to touch $1.07 and retained most of the gains on Tuesday to trade at $1.069 at the time of writing.

That said, according to MUFG strategist Lee Hardman, this may not be sufficient for an ongoing boost for the Euro.

“While the ECB’s reported plans to tighten excess liquidity in the euro area have helped to support the Euro, they are unlikely to be sufficient on their own to turn the current weakening trend,” he commented.

The single currency has lost traction over the past couple of months since it hit a 15-month high, as the ECB has moved closer to the end of the current rate hiking cycle.

In regard to the Dollar index, it remained unchanged at 105.04, near the six-month high from last week, Reuters reports.

Money markets predict the Federal Reserve will keep rates on hold at this week’s meeting, as per the CME FedWatch tool.

“The market is fully pricing in a hold, and this meeting was always likely to be a pass since the Fed skipped June, effectively moving to an every-other-meeting cadence,” stated Erik Weisman, chief economist and portfolio manager at MFS Investment Management.

“The market will be looking for any hints that the Fed may be leaning towards another hike by year-end or that a more persistent pause is in order.”

Elsewhere, Sterling was trading flat on Tuesday at $1.2384, ahead of the Bank of England’s meeting on Thursday.