Wall Street drops ahead of the FOMC statement today where the Fed may acknowledge faster growth in the economy.

  • The focus will be on the Federal Reserve, which is scheduled to release a statement at the end of its two-day interest rate-setting meeting tonight.  Analyst project 2% growth or faster in the second half of 2009, which is twice the pace the Fed forecast in June.
  • Expectation for the US central bank is to hold rates in range between zero and 0.25%, so investors will look for signals of an exit strategy from the Fed's efforts to revive the financial system. 
  • At Friday's close, all three major US indexes finished a fourth straight week of gains.  However, we see a downwards turn as analysts' comments hurt the financial sector.  The Dow Jones industrial average closed down 1.03% to 9242.  The Standard & Poor's 500 Index fell 1.27% closing below the 1000 mark at 994.  The Nasdaq Composite Index slid 1.13% breaking below the 2000 mark to 1970.
  • A pullback in risk sentiment continued to benefit the Japanese yen with the USDJPY collapsing over 150 pips from yesterday's high at 97.05.  The yen crosses also headed lower.
  • Crude Oil prices hit a high at $71.22 yesterday on news that China had increased oil imports.  However, prices reversed sharply after OPEC declared that it had adjusted its global oil demand projections.  OPEC now believes that global demand will drop by another 480,000 barrels a day for the remainder of 2009 and 380,000 barrels a day into 2010.

Currency to watch out for: EURUSD & GBPUSD

  • The EURUSD pivot point is at 1.4100 with a preference to enter into long positions at 1.4110
  • The GBPUSD pivot point is at 1.6435 with a preference to enter into long positions at 1.6445

Today's calendar and market movers:

  • UK Unemployment Rate expected to rise to 7.7%
  • EU Industrial Production month on month expected to drop to 0.3%
  • US Trade Balance expected to rise to -0.6 billion
  • US Crude Oil Inventories expected to fall to 0.7 million barrels
  • US Federal Funds Rate expected to remain between zero and 0.25% followed by the FOMC Statement

Stocks:

  • US stocks finished lower with all three major indexes shedding over 1% dragged lower by the financial sector.
  • As of 06:25 GMT the Nikkei is at -1.4% and the Hang Seng at -1.9%