Wednesday’s FOMC meeting is the market’s main focus this week, as it has the potential to shift market expectations and set the tone for trading for weeks to come.

The US dollar fell to yet another record low against the euro on Friday as traders remain overwhelmingly bearish on the greenback. Otherwise, the markets have remained bullish on nearly everything else, including commodities.

The US dollar barely missed hitting record lows against the Euro today and traded down across the majors as Durable Goods Orders were released at a much weaker-than-expected -1.7 percent.

Fed fund futures now price in an 86 percent chance of a 25 basis point cut on October 31 and are also starting to price in a 14 percent chance of a 50 basis point cut as it becomes clear just how dire the housing situation has become, especially in regards to its detrimental effects on the US economy.

The US dollar steadily lost ground today against nearly all of the majors as the forex markets remain overwhelmingly bearish on the beleaguered currency.

The US dollar made solid headway higher on Monday, but with little fundamental impetus other than simple short covering following the uneventful G7 meeting, the move highlights the speculative nature of the markets.

Implied Fed Fund futures are pricing in a 90 percent chance of an October rate cut based on continued weakness in the housing market, disappointing earnings in the banking sector, and a 550-point drop in the Dow.

Rising expectations for an interest rate cut has been the primary culprit for dollar weakness.

The US dollar has strengthened because it tends to benefit in environments of rising risk aversion where we see traders and investors move back to cash and into the safety of the US dollar

The US dollar is stronger across the board as stock market losses override weaker economic data.