The U.S. Federal Reserve's March minutes did not have the anticipated mpact on the Forex markets. Here are some of the highlights of the FOMC minutes:

About the economy, the Fed was looking for a probable contraction in the first half of the year stating, a prolonged and severe economic downturn could not be ruled out. The economy was facing a more severe and protracted downturn than it had initially anticipated.

On housing, the Fed warned that the slump has shown few signs of recovery and home values would continue to drop

The Fed mentioned that consumers were discouraged by the loss of home equity. Although it acknowledged that consumers were feeling the strains from the increasing cost of gasoline and food and that inflation had grown more quickly than anticipated, it felt that prices for consumer products would probably recede toward the end of the year.

The topic of inflation was introduced and argued. Some of the discussion centered on weighing the benefits of lowering interest rates against the possibility that inflation will get out of hand.

The issue of banks' borrowing also was presented. The main topic of discussion centered on the need to make it easier for banks to borrow from the government. The topic of negative-feedback was raised to describe a situation in which a restriction in credit availability prompts deterioration in the economic outlook that, in turn, spurs additional tightening in credit conditions.

The March 18 vote was not unanimous. Two members voted against the 75 bp cut arguing that the Fed could not afford to wait until there was clear evidence that inflation expectations were no longer anchored, as by then it would be too late to prevent a further increase in inflation pressures. They continued to argue that providing cheap loans to investment banks was a more effective and time-sensitive approach to improving the economy. These two members seemed to understand the urgency of the credit situation at the time as they wanted something that had an immediate impact as opposed to an action that would take months to take effect.

The majority, however, decided that a substantial easing in the stance of monetary policy was warranted at this meeting. The overall theme of the minutes seemed to focus on the tightness in the credit markets and the weak housing sector.

The FOMC minutes did not shed much light on the direction of the Dollar. By not mentioning the value of the Dollar, the Fed stayed true to its theme of letting it seek its own level. Other reports this week may have more dramatic consequences.

The Commitment of Traders report, which showed a huge amount of long Euro futures traders, must continue to be monitored if the Euro does not post a new all-time high on this current up move. The reason being, there are a lot of longs who will have to bail out if there is even a hint of weakness in the Euro Zone economy.

The European Central Bank meets on April 10. It is expected to leave rates unchanged. The language from its report will be closely watched as to future rate changes. The Group of Seven nations meet on April 11. They are supposed to announce no intervention on either side of the market at this time.

The housing problems, which have plagued the U.S. economy since the sector topped in July 2006, have hit the UK economy hard. On Tuesday, the UK's biggest mortgage lender said housing prices had their biggest drop last month since 1992. The Bank of England meets on April 10. It is expected to cut rates 25 bp. The combination of financial market turmoil and a weakening economy is cutting into growth and tax receipts also. Continue to look at the short side in the GBPUSD; do not get trapped in a short-covering rally as technical indicators are oversold.

Both the USDCHF and USDJPY traded mixed. The key to their direction is whether equity traders will take another shot at breaking out to the upside. The continuation of the stock market rally will put downside pressure on both pairs.

In fundamental news, the Bank of Japan meets April 8 and 9. Expectations are for the BOJ to leave interest rates alone. The main trend is up which means traders should focus on the long side especially after a one or two day break.

A day after building permits in Canada were down for the fourth straight month, and two days after a weak job growth report, further economic weakness appeared as new home starts fell in March. The bearish perception is that the Canadian economy is tied too closely to the weak U.S. economy.

The bulls are still looking at strength in the crude oil market as a reason to hold onto the Canadian Dollar. This mix of fundamentals is keeping the market at or near par. The Bank of Canada is treating the rally in crude as a short term event and is instead focusing on the weak economy. It is expected to cut rates 25 bp on April 22.

The AUDUSD was strong on higher commodity prices and the investors' need for return. The trend is down, however, so this current rally is likely to be a shorting opportunity.

Business confidence in New Zealand fell to a 33-year low due to the deteriorating economy. The NZDUSD should remain weak as slow economic growth is likely to lead to an interest rate cut later in the year.

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