Markets Await the US Rate Release Tomorrow.

The greenback lost some significant ground against the majors last week and it reached an all time low against the EUR. The negative dollar sentiment was mainly being driven by the recent weak jobs and housing figures which gave further indication last week that the US economy may be heading towards a recession. The Feds hesitancy to lower the interest rate has put the greenback on a slippery slope and the subprime and credit crisis have cast a shadow over the US economy. The most significant news that is expected from the US Today is the Empire State Business Conditions Index and it measures the general business conditions of manufacturers in the New York State. It is forecasted to release at 18.0, which is well below the previous figure of 25.0. If this figure comes inline or below expectations then it will reaffirm the fact that the US economy is slowing. With many investors already believing that the US economy is heading towards a recession it is likely that we may see this figure surprise on the downside. If this occurs then the greenback could experience some sharp bearish movement but it is more likely that it will range trade today as a result of investor caution.

Looking ahead to the rest of the week all the markets attention will mainly focus on Tuesday’s interest rate decision and statement by the Fed which is expected to lower the interest rate by 25 basis points coupled with a dovish statement that will follow the interest rate announcement. The Fed Statement will play a key role in determining the markets sentiment with regards to future interest rate expectations, while the rate cut should have an immediate impact on the market and provide the dollar with some respite particularly if the Fed springs a very rare surprise and drops the interest rate by 0.50 %. The other significant US data that investors will watch this week is the consumer inflation, US housing starts and the Philadelphia Fed Index.