All eyes on Federal Reserve Bank

prospects of a third quantitative easing programme and rate outlook.
At the moment interest rates are at 0,25 percent and they cannot hike or cut rates.
The Federal Reserve minutes are crucial to the market as they could affect your portfolio.
This will likely push volatility to certain levels not acceptable for most traders.
Normally, when volatility levels are too high it is more difficult for investors to hold positions in portfolios that are labelled the inner core.
What does it mean for the market when the Federal Bank is about to embark on such a project?
If Bernanke does hint on any form of quantitative easing, this will push the market to fall short of the US dollar and buy the euro.
All the same all vulnerable currencies will definitely rally the rand, Australian dollar, New Zealand dollar, Norwegian krone assisted by a euro rally.
If no announcement is made the reverse will happen and that also means the US market is currently doing well growth wise.
Growth in the US market means going long for the Canadian dollar and short for the US dollar and also look at the movement in the Mexican peso as well.
A recovery in the US market will better the demand outlook for Mexican and Canadian products and that does affect their exchange rates to the upside against the US dollar.
Quantitative easing also puts pressure on the US dollar against commodities in the near term as this could spike gold above US$1 700 an ounce since price volatility is higher during times of announcements.
In Europe, any positive developments on the ongoing Greek talks could drive the euro to the upside and could touch US$1,32 but as a trader, it will be wise to short the euro on any rallies given that the previous summits have failed to sustain any euro rallies.
According to EU finance ministers, Greece needs a special package but austerity measures have to play their part as the market continues to take directional cues from the European debt crisis.
The euro inched higher to trade at US$1,3157 to the dollar and extended gains against the yen to trade at 108,22.
In London, the sterling pound weakened against the euro to trade at 84,07 pence per euro, but extended losses against the dollar to trade at US$1,5627.
The Swiss National Bank is also expected to defend that Swiss-euro cap of 1,20 and also keep rates unchanged but will definitely buy more foreign currency to stem any Swiss franc gains.
The Swiss franc continues to firm against the euro as it traded at 1,2057.
In Asia, a slew of economic data from China and Japan is likely to contribute to certain currency movements.
The Chinese trade data was weak for the month of February as they had a trade deficit together with a poor GDP data that failed to beat expectations.
This has pushed the Chinese central bank to loosen reserve requirement and may cut it by at least 50 basis points to help stimulate growth.
China is a big fan for Australian resources and by so doing, this would create demand for commodities and will drive Aussie dollar into ecstasy.
As a trader go long Australian dollar and short the US dollar on such a move, the rand will benefit as well because the Chinese have invested heavily in the South African market.
If they don’t loosen up short all growth related currencies starting with the Australian dollar and consider a risk off currency like going long Swiss franc.
The Bank of Japan policymakers meeting will likely push them to expand their balance sheet to boost growth and that is likely to affect the yen to the downside against the dollar as the yen weakened to trade at 82,25 to the dollar.
The euro extended gains against the yen as the euro touched 108,22. There’s a strong bounce in the euro given that a stimulus package by the Bank of Japan is in the horizon and those Federal Reserve minutes could see the market short the yen and the dollar.
Buy euro against the yen at 108 and take profit at 112,50 since the yen is showing some traction against the euro.
A resurgence India will continue to create demand for commodities and drive commodity currencies to the upside.
South African market
Federal Bank announcement on rate outlook and quantitative easing could really push the rand to the upside and could touch 7,47 to the dollar. At the moment the rand is trading stronger at 7,5382 per dollar as it had earlier weakened to 7,5467 in Johannesburg.
The only thing that can punish any rand longs is a no quantitative easing programme but the rand could be supported by the Bank of Japan as they have indicated they will go ahead with a stimulus package to boost growth.
The correlation between the euro and the rand is a pain for most African traders as this pushes investors and traders to reduce net long positions in rand denominated assets.