Evening Report-Mar 18.

Indian Rupee closed on a strong note at 51.29 levels boosted by a more than 2.5 percent rise in the local share market which helped to ease the concerns of capital outflows but a stronger dollar overseas prevented a sharper rally. For U.S. Economy the consumer price report and FOMC rate decision due today and will present significant event risk and could spark volatility. Inflation is expected to have remained unchanged at 0.0% in February which may put an end to deflation concerns and return the focus to the upside risks. Fears are growing that as the government pumps the system full of money that it will give rise to future price pressures. Therefore the report will become an area of focus for the FOMC as determines future interest rate policy. Today the central bank is expected to leave its benchmark rate unchanged at 0.25% as it has little room for further easing. Until growth returns or inflationary pressure increase, we may see interest rates remain at low levels over the medium term. However, expectations are that the MPC will announce that they will increase their efforts to stimulate the economy that could include buying more treasuries or mortgages. The central bank has been debating whether to increase money supply or to target specific credit markets. Regardless Chairman Ben Bernanke is expected to lower growth expectations for the economy and project that unemployment will rise to as high as 10%. However if the future efforts of the committee are well received then a continuation of rising risk appetite and a weaker greenback is possible. Euro reached as high as 1.3068 during Asian trading on the back of comments from ECB President Trichet, which forecasted a recovery for the Euro-Zone by 2010. However, the expectations of dour fundamental data from the U.K. and a gloomy outlook from the FOMC started to fuel risk aversion which led to the Euro falling briefly back below 1.3000 before regaining support. Pound fell to as low as 1.3865 after the U.K. Employment report showed jobless claims rose by a record high 138,400. The increasing unemployment rolls sent the claimant count rate to 4.3% which was the highest since 1999. Meanwhile, the release of the Bank of England minutes showed that they voted 9-0 to cut their benchmark rate by 0.50% at their last policy meeting. The central bank was also unanimous in deciding to print £75 billion in order to buy government bonds. The MPC said the scale of the purchases needs to target CPI as it still see it at risk for undershooting their 2% target. The BoE also forecasted that growth in the first quarter could be a dismal as the fourth quarter of 2008 which contracted by 1.5%. However, if the dismal employment report fails to sink the pound further then we could see another attempt at the technical level and a break above could lead to an extended rally higher. USD/JPY continues to consolidate above the 98.00 price level .The BoJ left their rates unchanged at 0.10% as expected but announced that it will increase its government bond purchases to 1.8 trillion Yen. Meanwhile, Prime Minister is preparing the country’s third stimulus package as the economy is shrinking by double digits and continues to be hurt by the drop in global demand. The Yen was little changed on the news as markets had started pricing in the increased buying after the SNB launched their own efforts.