David Morris

THE two-day US Federal Open Market Committee (FOMC) meeting ends tomorrow. This should end months of speculation over the size and scope of additional monetary stimulus. Last week, the Federal Reserve sent out a number of conflicting signals concerning its next move. Rather than narrowing the range of possible outcomes, the Fed has kept investors guessing. A growing number of traders now wonder what the Fed is playing at. Matters weren’t helped after it canvassed the opinions of its 18 Primary Dealers over the size of any stimulus. After all, why ask the very people who have the most to gain from further monetisation? With just a few hours to go, it’s a case of placing your bets and crossing your fingers, or walking away from the table.

But once the FOMC meeting is out of the way, there are other uncertainties to deal with. The rally in the euro since early September (thanks mainly to QE2 expectations weakening the dollar) has helped hide the Eurozone’s unresolved issues with its weaker members. It is likely that these will come to the fore as it becomes painfully apparent that it is easier to talk about budget cuts than to deliver them.

This week, the Portuguese parliament holds its delayed budget discussion, while later this month Spanish MPs have a vote on spending cuts and tax rises. Greece has local elections on Sunday with prime minister George Papandreou threatening a general election if his party does badly. The budget has to be submitted by 18 November, and parliament has to vote on it before Christmas. This month, a delegation will be looking at the progress of Greek austerity measures.

By tomorrow we will have the US mid-term election results and investors will focus on central bank meetings in the UK, Europe and Japan. US non-farm payrolls round things off on Friday, so there’s plenty to keep the markets moving. Then we can start talking about QE3.