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Current Futures: Dow -31.00, S&P -3.90, NASDAQ -6.50

Asian markets declined from a seven month high as the Fed forecasted a stronger recession, strengthening the Japanese yen. U.S. futures also moved lower, extending the declines seen during the spot session.

The latest Fed minutes showed that the pace of contraction in the U.S. economy had lost some of its pace, but still the committee members downgraded their 2009 and 2010 outlook. Moreover, the Fed officials saw the need to increase the available funds for bond purchases, which now reach $1.75 trillion.

TheLFB-Forex.com Trade Team notes that the Fed may be tempted to increase their bond purchases because yields are again heading higher, which has the potential to slow the economy and reverse the rate cuts made by the Fed. Investors are exiting the bond market for higher yielding assets since they feel the economy is recovering. This, in turn, puts upside pressure on the bond’s yields, something that the Fed tries to keep as low as possible. Since March when the equity rally first started, the yield on 10-year Treasury note rose 0.600% basis points. 

The weak economic reports that hit the financial markets over the last few days helped the Japanese yen strengthen as investors use the currency as a safe heaven. As such, the Japanese yen reached tonight the lowest value against the dollar in the last two months of trading. However, as TheLFB-Forex.com Trade Team commented it puts additional pressure on Japanese exports, something that really should be avoided when the economy is contracting 4.0% a quarter and companies are forecasting a very weak year ahead. 

Overnight, the Japanese Nikkei declined 128.59 points (1.38%) to 9,216.05. The Australian S&P/Asx fell 23.80 points (0.60%) to 3,800.80. 

Crude oil for June delivery was recently trading at $61.50 per barrel, lower by $0.50.

Gold for June delivery was recently trading higher by $2.00 to $939.40.

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