The following is an excerpt from Emily Jane Fox | September 9, 2012 | CNN.com |
NEW YORK (CNNMoney) — Investors will once again look for further measures to stimulate the U.S. economy as the Federal Reserve meets this week. They’ll also be watching Europe, as the German Constitutional Court hands down a ruling that could impact the European Central Bank’s plans to preserve the euro.
The court is expected to issue a decision on Wednesday about the legality of the European Stability Mechanism, a permanent bailout fund that is the cornerstone of the eurozone’s financial firewall. The court isn’t expected to rule against the ESM, but it could attach conditions that would make it difficult for the fund to respond quickly to crises.
Conditions could also impact the bond-buying plan that ECB president Mario Drgahi outlined last week.
“This court ruling could complicate things enormously, but that’s unlikely,” said Brian Gendreau, market strategist with Cetera Financial Group. “Investors are likely to keep focusing on the ECB’s plan as a roadmap, which it’s been lacking for quite a while.”
While the ruling has the potential to throw markets, investors will mostly be looking toward the Fed’s two-day meeting that kicks off on Wednesday.
Going into the meeting, investors hope that the central bank will enact further stimulus measures is high. The Fed has said it “will act” if the economy merely stays the same, which a weak August jobs report last week seemed to suggest.
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