Inter-market correlations broke down in a very sloppy session for price action. NY trading began with an overall ''risk on'' tone as the details of the US ISM services index seemingly got investors excited. New orders rose on the month and given the leading properties of this indicator, expectations for growth were likely ratcheted up. The employment index dropped sharply, however, and this does not bode well for Friday's NFP release. We are currently anticipating a decline of -190K and a jump in the unemployment rate to 10.0%. Stocks remained better bid until a selloff in the final 30 minutes of trading left them about flat on the day. Risk was pared as the ECB and BOE rate meetings loom tomorrow in the NY morning.

The FOMC press statement was also out and was initially very confusing for the market as traders did not know how to interpret the headline that the Fed will be cutting its agency purchase target to $175bn from $200bn. In our view, the cut to the agency debt purchase size is not that significant given that the Fed's justification for this is that the availability of this debt is limited †it is NOT that credit conditions in the US have improved. The fact that the credit markets remain strained and that this is not a real cut to the Fed's quantitative easing (money printing) left both stocks and the US dollar weaker into the close.

The buck witnessed its largest drop against EUR in about two months as the pair rocketed to a high above 1.49 after opening the session near the 1.4745/50 area. The short-term upside remains in focus now while above the 200-hour sma which lurks all the way down at 1.4813 currently. The other big mover today was gold (XAU/USD) as momentum buyers remained heavy participants in the precious metal space. Gold added more than $8 on the day and trades around $1092 as we write. The bias remains higher while above $1085 and an hourly trendline rests by $1105 as the potential short-term target.