The euro rallied sharply vis-Ã -vis the U.S. dollar today as the single currency tested offers around the US$ 1.4105 level and was supported around the $1.3830 level. The common currency€™s climb was precipitated by increasing speculation the Federal Open Market Committee will try to manage expectations about a possible interest rate increase later this year. There is a growing market view the Fed€™s federal funds target rate will remain between 0% and 0.25% for the remainder of the year. Some traders believe the Fed will try to signal an eventual end to its quantitative easing policy while others believe the Fed will extend its US$ 300 billion U.S. Treasury purchases program. Fed funds futures are currently pricing in about a 42% chance the Fed will raise its fed funds target rate to 0.50% by December, down from a 49% chance one week ago. Data released in the U.S. today saw May existing home sales rise 2.4% to an annualized 4.77 million annual rate from 4.66 million in April. Other data saw the Richmond Fed€™s June manufacturing shipments index decline to +2 from +9 in May while the headline maufacturing index improved to +6 from +4 in May. In eurozone news, European Central Bank policymaker Weber reported policymakers have already reduced interest rates as much as possible, an indication the ECB is probably more hawkish than the Fed at this time. Weber also said policymakers would €œhave to bypass the banking sector€ if it is unable to provide the real eurozone economy with ample credit. This suggests the ECB could extend its plan to purchase up to ‚¬60 billion in covered bonds to ease market interest rates. Weber also said the economic growth forecasts for 2011 are €œrelatively modest.€ ECB member Nowotny added there is €œjustified hope that at least the financial markets have the worst behind them.€ Similarly, ECB policymaker Quaden said the eurozone€™s economy will be €œless bad€ for the rest of the year and then progressively improve in 2010. Additionally, ECB policymaker Noyer said the ECB €œmust stand ready to absorb excess liquidity as soon as necessary. Today, there is no need to start or even prepare for an imminent start.€ Noyer added €œMonetary policy must be eased without jeopardizing price stability. If we had a de-anchoring of inflation expectations, we would have durably slower growth or even economic stagnation.€ Data released in the eurozone today saw the June EMU-16 composite Purchasing Managers Index improve to 44.4 from 44.0 in May, below expectations. Moreover, the German July GfK consumer confidence index improved to 2.9 from 2.6 in June. Euro bids are cited around the US$ 1.3435 level.