Dollar pares back some gains today but remains the strongest one for the week. FOMC minutes will be a main focus for the day which could decide whether the greenback can extend its rebound. So far, technically, such rebound in Dollar doesn't warrant a trend reversal yet. For example, EUR/USD is held above 1.1688 minor support and well above 1.1606 fibonacci level. That is, EUR/USD's near term outlook remains bullish. USD/CHF is help below 0.9772 resistance and thus, not confirming resumption of rebound from 0.9473. AUD/USD is also held well above 0.7785 cluster support, and the pull back from 0.8065 is seen as a correction. The main exception is GBP/USD which is building up the case of bearish reversal, thanks to Sterling's own weakness.
Regarding minutes of July FOMC meeting, the markets will be particularly interested in knowing policymaker's view on inflation outlook. In the accompanying statement of the meeting, policymakers acknowledged that the overall inflation and the measure excluding food and energy prices (core inflation) have "declined" and are "running below 2%". The removal of the word "somewhat" signaled the weakness in inflation is more than the Fed had anticipated. We would look to see if the Fed maintained the view that weak inflation is "transitory".
So far, Fed officials have been rather cautious regarding the chance of another rate hike by the end of the year. The main exception is New York Fed President William Dudley while remained "favor of doing another rate hike later this year". After his comments earlier this week, market pricing of Fed rate path returned to normal. For now, Fed fund futures are pricing in 98.6% chance for Fed to stand pat in September. Chance of a rate hike in December is roughly 50%.
German FM Schaeuble defends ECB asset purchases
Germany's constitutional court requested European Court of Justice for a ruling on whether ECB's asset purchase program as violated the ban on financing governments. ECB quickly acted to defend and said in a statement that "the extended asset purchase programme is in our opinion fully within our mandate." German Finance Minister Wolfgang Schaeuble also said that ECB's "mandate is being implemented" ECB was exhausting its tools to "fulfil its hellishly difficult task of devising a monetary policy for many different countries".
UK Job, Eurozone GDP to highlight European session
On the data front, Australia Westpac leading index rose 0.1% mom in July, wage cost index rose 0.5% qoq in Q2. UK job data will be a major focus in European session, which could decide whether Sterling's broad based decline will extend. Eurozone GDP is another focus. Later in US session, US will release housing starts and building permits before FOMC minutes.