The euro appreciated vis-Ã -vis the U.S. dollar today as the single currency tested offers around the US$ 1.5690 level and was supported around the $1.5530 level. The common currency established a new lifetime high today as traders reacted to news that JPMorgan Chase and the Federal Reserve Bank of New York are providing 28-day funding to U.S. investment bank Bear Stearns. Bear announced that liquidity evaporated yesterday and traders are sensitive to any additional funding shortfalls by U.S. financial institutions. The fed funds futures markets is currently discounting about a 66% chance the Federal Open Market Committee will reduce the federal funds target rate by a cumulative 125bps over the next two meetings, but many dealers believe interest rate expectations may have gotten ahead of themselves. Data released in the U.S. today saw the University of Michigan consumer sentiment index fall to 70.5 from 70.8 in February. Also, February consumer price inflation data came in on the tame side with the headline and core rates both unchanged m/m and below expectations. A moderation in inflation pressures will provide the Federal Reserve with more scope to ease monetary policy. Headline CPI was up 0.4% y/y and 2.3% y/y. In eurozone news, EMU-15 consumer price inflation was upwardly revised to an all-time high of 3.3% for February and this will keep the European Central Bank on the offensive as far as inflation is concerned. Traders are paying very close attention to a summit of European Union officials and the communiquÃ© they will issue. Officials are expected to verbally intervene against disorderly exchange rate movements and their meeting only increases chances of a concerted global intervention to support the U.S. dollar. Other data released in the eurozone today saw EMU-13 Q4 labour costs up 3.5% y/y while German final February CPI was up 0.5% m/m and 2.8% y/y. Also, EMU-13 Q4 2007 wages were up 2.9% y/y. Euro bids are cited around the US$ 1.5145 level.
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