World wide wait for the FOMC meeting

[RTFXtrading]

Yesterday Lehman filled for bankruptcy, Merrill Lynch engulfed by Bank of America, these caused a ripple effect. Fear now sweeps globally as everybody is awaiting and asking, who’s next? Yet the risk appetite in the currency market stayed yesterday with JPY and CHF as the best performers while NZD and AUD suffered the most.

All eyes on the Fed today with talks of a potential 100 bp cut with the entire ongoing liquidity crisis continue to take its toll. Will the Fed lean more to 100 bp cut or 50 bp? 50 is the more likely scenario which will leave some bps to work further along the line which probably be needed.

The reaction of the market to any Fed decision today? Your guess is as good as mine. The US government has decided to let Lehman fall into Chapter 11, this is the first time it happens as they felt that they have taken enough risk by bailing out Bear Stearns and taking over Fannie / Freddie. This sends a message out that the financial industry must try to resolve the problem on its own rather than to automatically assume that either the Fed or the US government will immediately jump to their aid with every single problem.

One thing is sure today, volatility will be present as the market awaits the FOMC meeting. EUR/USD is back around today’s opening price at 1.4241 after touching high of 1.4309 and low of 1.4180. USD/JPY down 0.53% at 104.10, USD/CHF down 0.70% at 1.1076, AUD/USD down 2.16% at 0.7891 and NZD/USD down 1.3% at 0.6505.