The Fed will publish its FOMC Statement on Wednesday and this has essentially turned the broad markets into a cautious mode. Gold and the FX market have traded in a consolidated fashion. And who can blame them?

While it is true some economic data has been a bit better than expected, many road signs remain troublesome and it is possible the American economy is not as brilliant as it is being proclaimed by some. The U.S. will be light on reports today. The German ZEW Economic Sentiment reading will be announced shortly. Interestingly, German numbers and other statistics from sister nations within the E.U. have fallen short in the past week, which continues to highlight that growth remains an elusive goal for the continent. Global investors are poised and will watch the final Fed policy meeting for the year wondering if it will give a holiday surprise.

Gold is trading near 1239.oo as of this writing and serves as a barometer for traders who seek volatility. The precious metal has hovered above important support levels the past couple of weeks but has certainly not given much hope of turning into a bull market. If the Fed should announce that tapering is to begin in earnest sooner rather than later on Wednesday it could spur on a rollercoaster like ride for Gold. Commodities have been just as cautious as the FX markets, Crude Oil has nearly traded in place the past couple of weeks – WTI has produced tight trading as market participants sit on the fence.

Traders should also note that inflationary reports continue to show that deflation in many instances remains the problem. Also noteworthy is that data from China has become disappointing again, leading some analysts to keep to their convictions that reports are being manipulated in order to create a rosier picture to soften what has become an economy under pressure within the Asian giant.

The Single Currency remains on the verge of key resistance levels. Tomorrow’s FOMC Statement from the States will certainly have an effect on the EUR, as it will all the major currencies. The GBP which was strong all summer has not gone into hibernation for the coming winter, but it has certainly found plenty of resistance in the past few weeks. The JPY is trading at weaker values, but has also bounced along these values as Asian traders wait for further clarification from the Federal Reserve.

FX traders have been a rather tranquil bunch (or cynical crowd depending on perceptions) as they have watched the USD go lower in the past couple of months. But if the Fed should surprise tomorrow night and actually become aggressive on the eve of Ben Bernanke’s handover to Janet Yellen it would create an instant reaction with all currencies and global equity markets – particularly on Wall Street which has turned nervous the past week.

Risk appetite has been high the past couple of months and investors will need to translate the long-term ramifications that tomorrow’s Fed policy meeting produces. While nice returns have certainly come from bourses with climbing equity prices, any abrupt turn of policy from the Fed could turn the markets into a preservation mode instead of a speculative sphere which have been taking advantage of ‘cheap’ money. Economic reports the past couple of weeks from Europe, Asia, and the States continue to paint a mixed outlook open for interpretation. The spotlight will shine on tomorrow’s FOMC Statement and its actions could shake the markets out of its cautious doldrums. The crisis of 2008 may be five years behind us but it is still being dealt with.