The Fed could stave off the stock market loses and it has been widely expected that it will do whatever necessary to bring the stability back to the housing and the stock market. Until now the concerns of another resurfacing of the crediting problems still exist.
So, the currency market focus is expected to be on the stock market to choose between the carry trades getting use again of the interest rate differential and its outlook or another unwinding wave can push the Japanese yen higher and the USD across the broad because of the selling in the stock market and buying the US treasury notes.
However the waited Fed's cut currently can add to the inflation pressure which can bring the gold back to the 680 – 700 levels. I see it as one of the preferred instrument to buy at this case.
The volatility in a mixed vision should be the mark of the markets currently as the steep decline in the stock market due to the crisis and from another side the central banks tries to install the stability and the trust to attract funds taking risk again!
So, it is important to listen to Ben Bernenke talking about this crisis and the Fed's stance by the end of this week. There are also keys to be mentioned as US Q2 GDP preliminary next Thursday and US August Chicago PMI next Friday.