The FOMC minutes generally confirmed that policymakers foresee a taper to their QE policy by as early as September, but that the decision will be made in accordance with upcoming economic data. So far, the data continues to confirm a modest recovery. For instance, release of existing home sale figures rose to levels not seen in four years. Prior to any of this is of course the release of PMI flash estimates for the service and manufacturing sectors in the eurozone. The surveys are forecast to move into expansion territory. Continued signs of a recovery during the month of August could help limit selling pressure on the euro. There is no local data expected to be released in the UK, but comments from BoE’s Weale, who suggested he could see circumstances where the central bank would have to increase its asset purchase programme, have triggered a bout of profit taking in long sterling positions.

Sterling

Sterling shrugged off public sector net borrowing data that showed a reduction in spending had not been achieved. Nevertheless, the gain in borrowing was minimal and does not change the outlook for the Government to meet its goals. On the other hand, sterling found support when CBI trends survey moved to levels not seen in two years. Export orders and expectations components all rose to levels not seen in a year or two.

US dollar

FOMC’s minutes said that some policymakers thought this, while others thought that, and a few maybe thought something else, so headlines could draw pretty much what they want from the release. However, there did seem to be a small consensus building that the economy was improving and tensions within the financial system were easing, making it possible to taper by September assuming economic data continues to reveal a recovering economy.

Euro

Talk of more Greek bailouts has probably helped to limit the euro’s immediate upside after touching six-month highs. Investors booked profit on long euro positions in front of the release of the FOMC minutes. Selling pressure extended after the minutes as the outlook for a September tapering of QE remained, for the most part, intact. Focus shifts back to the eurozone were PMI flash estimates for the service and manufacturing sectors will be released. The forecasts suggest that the sectors have returned to expansion territory, which could prompt investors to move back into the euro.