Stock Index Futures Sell Off Ahead of Fed Statement
Equity markets sold off sharply into the close ahead of
tomorrowâ€™s Federal Reserve Open Market Committee meeting. Traders have been
reluctant to chase stocks higher this week despite better than expected
economic news which showed the U.S.
economy is improving.
March Treasury Bonds and Treasury Notes traded under
pressure all day.Investors continued to
drive yields higher in anticipation of a rate hike by the Fed by June
2010.Traders are nervous that the Fed
may put out a more hawkish comment tomorrow which may move up the date of the
first rate hike in years.Todayâ€™s better
than expected U.S.
producer prices and industrial output reports helped trigger a hard intra-day
break in both markets.
February Gold moved higher after trading sharply lower
overnight because of the stronger Dollar.Gold bottomed at $1112.00 this morning after the release of the U.S.
Producer inflation data.Todayâ€™s action
could be a sign that traders have exhausted goldâ€™s relationship with the Dollar
and may now shift to reacting to an inflationary scenario.
March Crude Oil held yesterdayâ€™s low at 72.45 and held firm
throughout the day. The boost in U.S. Industrial Production helped to
contribute to the rally as it indicates a possible increase in demand for
energy in the future. At the close, the market held a .618 price level at
73.63. The chart formation indicates a rally to 75.53 is possible over the
The U.S. Dollar traded higher all day as speculators increased
bets that the Fed would issue a more hawkish monetary policy statement
tomorrow. Last night the main trend turned up on the weekly chart leading to a
firm opening this morning.
The March Euro stopped just short of piercing 1.4500.
Overnight, sellers hit the Euro hard following the release of the German ZEW
Economic Expectation Index report. Better than expected U.S. economic data and concerns over Euro Zone
bank exposure to Greece, Portugal and Spain debt helped accelerate the
The March British Pound was under pressure all day but remained
inside of a retracement zone at 1.6292 to 1.6154.Overnight news that U.K. November CPI
increased to 1.9% was largely ignored by traders since the pre-report guess was
for an increase of 1.8%.This currency
is not likely to move until it breaks out of its short-term trading range.
Todayâ€™s better than expected U.S. Industrial Output report put
downside pressure on the March Japanese Yen as it sent a signal to traders that
the Fed was coming closer to hiking its benchmark interest rate. Traders have
become more confident that the Fed will hike rates sooner than expected while
the Bank of Japan is expected to keep interest rates unchanged at 0.10% on
December 17th.The increase in the
spread between the two interest rates helped trigger a reversal in the
carry-trade. Investors bought Dollars to payback loans while simultaneously
Weaker Gold and the stronger Dollar helped trigger an
overnight break in the March Swiss Franc.The down move accelerated throughout the day following the release of
the better than expected U.S. Industrial Output report. This currency is now at
its highest level since October. Swiss traders are pricing in possible banking
issues with Euro Zone banks.
The March Canadian Dollar traded weaker on Tuesday but
remained inside the two month range. Stronger gold helped this market
turnaround after early downside pressure.Firmer crude oil could help limit losses.
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POTENTIAL PRICE RISK: HIGH to Medium- Wed --14:15 GMT-- US- Industrial Production
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