Financial Watch

The Federal Reserve has a more optimistic outlook for the U.S. economy, according to meeting minutes released Wednesday, but the central bank is still debating how to shrink its massive balance sheet.

The Fed now expects U.S. gross domestic product, the broadest measure of economic activity, to increase at an annual rate of between 3.2% and 3.7% in 2010. That’s up from the Fed’s previous estimate of between 2.8% and 3.5% in January.

GDP rose at a 3.2% annual rate in the first three months of this year, the government said last month.

Goldman Sachs Fraud Allegations Affects Currency and Financial Markets. Recently news broke that the SEC is accusing Goldman Sachs of fraud because of some of their positions in various subprime mortgage holdings.

Currently, Goldman Sach’s claims that the SEC’s charges are unfounded and untrue. The SEC maintains that the company misstated and misquoted information and mislead investors in certain subprime mortgage holdings.

The news of the fraud has negatively impacted the financial market. US Stocks in the S&P 500 fell 1.6% on the news. The Dow Jones Industrial fell 125.91 points upon the news, and closed barely over 11,000.

The U.S Dollar edged down versus the EUR during the session as traders look ahead to key U.S. economic data and congressional testimony from Federal Reserve Chairman Ben Bernanke later today. Traders will listen closely for any hints of changes to how long the Fed may keep Interest Rates on hold.

USD – Dollar falls vs. Yen as Trade Deficit Widens
The Dollar rose against the EUR on Tuesday after a Greek debt auction showed the market asked a high price to hold the assets and Greece’s fiscal crisis would continue to weigh on the single currency. The Dollar also gained on talk among traders that a U.S. think tank report said the Federal Reserve was closer to raising one of its key Interest Rates.