The euro appreciated vis-à-vis the U.S. dollar today as the single currency tested offers around the US$ 1.5750 level and was supported around the $1.5630 level. The common currency reached its highest level since 9 June as traders reduced their long U.S. exposure following the Federal Open Market Committee’s interest rate decision yesterday to hold the federal funds target rate unchanged at 2.00%. The FOMC was not as hawkish as many dealers had expected and many traders do not believe the Fed will raise interest rates any earlier than December. The FOMC reported Recent information indicates that overall economic activity continues to expand, partly reflecting some firming in household spending. However, labor markets have softened further and financial markets remain under considerable stress. Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters. The Committee expects inflation to moderate later this year and next year. However, in light of the continued increases in the prices of energy and some other commodities and the elevated state of some indicators of inflation expectations, uncertainty about the inflation outlook remains high. The substantial easing of monetary policy to date, combined with ongoing measures to foster market liquidity, should help to promote moderate growth over time. Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased. The Committee will continue to monitor economic and financial developments and will act as needed to promote sustainable economic growth and price stability. Notably, Dallas Fed President Fisher voted for a hike in rates. Data released in the U.S. today saw May existing home sales up 2.0% to an annualized 4.99 million pace. Also, final Q1 GDP growth was upwardly revised to 1.0%, the latest evidence that the U.S. economy avoided recession at the beginning of the year. Other data saw weekly initial jobless claims remain unchanged at 384,000 while continuing jobless claims were up 82,000 to 3.139 million. In eurozone news, German provisional consumer price inflation data for June will be released tomorrow. Data released in the eurozone today saw May M3 money supply growth of 10.5% y/y, unchanged from April’s result. Also, German May import prices were up 2.4% m/m and 7.9% y/y. Euro bids are cited around the $1.5230 level.
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