Federal ReserveAt this point in time, the currency markets are moving on ideas of what the Federal Reserve will be doing, as traders certainly expect an interest rate cut in September. However, the real question then becomes what does the Federal Reserve do later? I think at this point in time it has become obvious that the market will continue to look at the Federal Reserve as being very dovish, and if that’s going to be the case it does make a certain amount of sense that the US dollar will soften. However, I would caution traders on getting far too dovish on the greenback. After all, there are a lot of economic concerns out there and the US dollar is quite often used as a form of safety, as traders will run to the US Treasury market as soon as trouble comes. The global economy is a bit of a mess right now, and while some of the numbers look okay, the reality is that we still have massive differentials from country to country, and it seems like instability is probably the new norm. If that is going to be the case, then you are very likely going to see a situation where sooner or later, there will be some type of shock to the system that has people running toward the greenback. That being said, in the short term it looks like the British pound is going to continue to attract inflows.More By This Author:CAD/JPY Forex Signal: Yen Weakens Amid RecoveryPairs In Focus – Sunday, Sept. 1GBP/USD Forecast: Pullback To 1.31 Likely
