As expected, the Fed left interest rates unchanged at 5.25 percent, but both the US dollar and the US stock market tanked on the back of the monetary policy statement.

If oil crashes, there will be ripple effects across many economies. The trade to turn to is the Canadian dollar.

Equities, bond yields and the US dollar are all higher today indicating that the markets are collectively hoping for some reassurance from the Federal Reserve tomorrow.

Despite a sharp rise in consumer confidence and a drop in average weekly jobless claims, US corporations only added 92k jobs onto their payrolls, which was the weakest level since February 2007 and the third weakest in two years.

The stability of the US economy hinges on the strength of the labor market because non-farm payrolls could easily make or break it for the US dollar.

The hope for a strong non-farm payrolls report tomorrow has helped keep equities, carry trades and USD/JPY in positive territory for most of the US trading session.

Volatility has rocked the markets and no asset has been spared including stocks, bonds and oil prices.

The markets are selling off once again as the troubles in the sub-prime sector continue to grow.

Today’s rebound in the financial markets has everyone hoping that we have hit a bottom. Stocks, carry trades and bond yields are all up sharply, but given the strong selling that we saw last week, a recovery is hardly surprising.

The problems in the US housing market are worsening and anyone who is long stocks, carry trades or the US dollar is feeling the pain.