Wednesday June 30, 2004 - 20:52:17 GMT
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INVESTICA Ltd - www.investica.co.uk
Balanced Fed view eases dollar volatility threat
The Fed increased rates by 0.25% as expected to 1.25%. The statement also retained the reference to a measured approach, but warned that it would respond to changing economic conditions if necessary.
The Fed has done a god job in managing expectations and issuing a balanced statement. This will ease the threat of dollar volatility and avoid a rapid adjustment in market expectations. The good job was illustrated by a slightly firmer bond market after the Fed.
The immediate implications over the next 24 hours should be for a weaker US dollar, but the Euro will need to punch through 1.2250 to sustain the advantage and potentially target 1.2350. The chances look to be no better than 50%. Euro support should be firm at 1.2075.
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