The Federal Reserve reserves the right of having immense influence on the markets, be it the FOMC statement or the Chairman’s speech or any minutes from their meetings. So when the next Fed meeting is three weeks away, the markets have already been seriously gambling on the outcome of the meeting. However, traders expect to see the next set of clues to Fed easing in tonight’s release of minutes from the Fed’s March meeting. The financial markets has held a spirited debate about whether the Fed will ease, since just before its March meeting, when Fed Chairman Bernanke testified before the Congress that the Fed did not, for now, have to do another round of QE.

But some economic data and new comments from Bernanke last week have sent yields lower, and expectations for easing have risen again. Yet, hawkish Fed members continue to discount the need for another round of QE, or asset purchase, and they question the Fed’s collective forecast that rates will stay super low through 2014.

Traders say they are looking to see if the Fed will directly mention the ‘operation twist’, since the high-profiled program is expiring at the end of June. Twist is a program where the Fed sells short-dated Treasury’s and buys longer duration securities in an effort to keep the rates low. If the Fed decides to implement QE3, Fed officials have said it would target mortgage securities, instead of Treasury’s as the prior programs have done. However, the Fed could also wait until June meeting if there is not enough support for QE because it will get several more important readings on the economies by then.

Investors opine that the biggest news event, or data point to come before the next Fed meeting, are these minutes and the employment report. These two things together will have impact on the market’s assessment of how likely it is. Besides the Fed minutes today, there are factory orders and monthly car sales which the markets will keep an eye on.

The commodity markets were resurrected yesterday with gold and crude oil showing the way. But it is yet to be seen whether the minor uptrend is just a minor dent in the continuing downtrend of the markets. Watch this space for more updates.