After last week’s turmoil caused by the attempted fraud at Societe Generale, sentiment towards financial institutions is not good. Not to mention that there are voices saying that the American and Japanese economies are heading towards recession. In such bad mood, investors will await very important macroeconomic reports.

This week investors will focus on the FOMC interest rate decision and on the U.S labor market publications. The Fed will meet on Wednesday and is expected to cut interest rates by 50 basis points to 3.00% and the discount rate by the same amount to 3.50%. Such move seems really drastic, taking into account that last week the Fed on an unscheduled meeting cut interest rates by 75 basis points. Markets anxiously await the decision. The same day the GDP for the last quarter of 2007 will be announced (forecast: 1.2%) and the ADP Employment Report. Wednesday will important for Polish investors since the Monetary Policy Council (MPC) will make its interest rate decision. Increasing inflationary pressures in Poland may cause the MPC to hike interest rates by 25 basis points to 5.25%.

Friday will be as crucial for the markets as mid-week. On Friday the U.S labor market reports are being published. Unemployment rate is expected to remain at 5.0% but what makes investors nervous on the first Friday of the month is the Nonfarm unemployement report (forecast: 65K, previous 18K). This report can cause big movements mainly on the EUR/USD.

Adam Narczewski