How the markets will respond to tomorrow’s decision will be dependent upon not only what the Fed does, but also what they say.

Although traders shrugged off the less-than-impressive retail sales figures, the data is one of the main factors that will drive the Federal Reserve to cut rates next Tuesday.

With the release of US retail sales anticipated to improve on Friday, the US dollar could see a substantial boost.

Now the weak labor market not only gives the Fed a big excuse to lower rates, it gives them no choice but to do so.

The US dollar came within a hair of its all-time record low against the Euro, and it is just a matter of time before that record will be broken.

The price action in the financial markets indicates that traders are nervous and Fed officials attempt to pacify the market’s fears.

The Federal Reserve can no longer pretend that the subprime and credit crisis is not having an impact on the overall economy.

It is highly unlikely that the US central bank will forgo cutting interest rates, since it is fully priced into the market.

Tomorrow’s European Central Bank interest rate decision is expected to take the Euro out of its 1.3550 to 1.3680 trading range.

The US dollar’s rally against the Euro and British pound, as well as the mixed performance of bond yields, suggests that the financial markets have not turned suddenly optimistic.