The Financial Fixed Odds update from David Evans, Market Analyst, BetOnMarkets.

After yesterday’s blood letting, forex and financial markets have recovered some of their poise in early trading.

The Euro, which was at the epicenter of yesterday’s sell off, has recovered some lost ground against the US dollar (EUR/USD +0.38%) and yen (EUR/JPY +0.5%).

The biggest gainer this morning is the Aussie dollar with the AUD/ USD up 0.83% and AUD/ JPY 0.9% on the back of strong inflation (CPI) data.

Without doubt though, the day’s top announcement is the FOMC statement at 19.15. No one is expecting a rate hike at this meeting, but in recent weeks there have been some hints that the Fed may be to take some steps to prevent another credit bubble growing again.

If the Fed sends too strong a signal, it could further unnerve markets on the back of yesterday’s jitters. Alternatively, if the Fed hints that it will continue its accommodating position, it could help sooth markets.

Reasons to Be Fearful

Yesterday morning saw a sell-off which intensified after Standard & Poors downgraded Greek debt to junk status. Many are now speculating that Greek bond holders could lose as much as 30-50%.

To add to the general morass, S&P also downgraded Portugal’s sovereign debt, sparking further and wider selling.

The situation is still complex with many blaming Germany for its hardball stance. Some are even speculating that Germany’s game is to weed out the weaker members of the eurozone such as Greece and Portugal, resulting in a streamlined and potentially stronger Euro once the dust has settled.

Yesterday wasn’t specific to the Euro, the Pound also hit hard and the FTSE took a huge 2% hit on the day.

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