BoE Minutes, BoC, Bernanke Featured Today

The dollar is recovering mildly today as markets are awaiting Fed Chairman Bernanke‘s highly anticipated semi-annual testimony. Bernanke will testify to the House today and the Senate tomorrow. The dollar jumped sharply back in June on expectations that the Fed will taper the stimulus program later this year, and some speculated that it will start scaling back the asset purchase as soon as in September. However, Bernanke's dovish comments last week, which pledged that policy will stay accommodative as long as needed, raised some uncertainties over such speculations. The greenback than gave up much of its recent gains since. The keys are when the Fed will actually start reducing the USD 85b per month purchases, in what way and thirdly at what pace. If Bernanke just repeats his comments from last week, we might see some more weakness in the greenback in the near term. The U.S. is scheduled to release housing starts and building permits.

Another focus of the day: the BoE minutes of the July 3-4 meeting. Focus is on new BoE governor Carney's vote on size of the asset purchase program. The minutes might also reveal discussions tying the central bank's guidance on interest rates to economic developments. The U.K. will release job market data, including claimant count and unemployment rates.

Attention will also be given to the BoC rate decision. It's widely expected that the central bank will keep rates unchanged at 1.00%. At Carney's last meeting, the statement somewhat maintained tightening bias and noted that "considerable monetary policy stimulus currently in place will likely remain appropriate for a period of time, after which some modest withdrawal will likely be required". Focus will be on whether Poloz will drop the reference to withdrawal of stimulus.

Released earlier today, minutes for the BoJ's June 10-11 meeting noted that there were discussions whether to take measures to calm recent bond market volatility. There were discussions about extending the maximum duration of fixed-rate funds offered via market operations from one year. Some policy makers noted that would restrain "excess interest rate fluctuations". However, some opposed as that might be misread by market as a change in the central bank's framework. After all, most members believed that markets will stabilize over time. Meanwhile, one member proposed to limit the duration of the monetary stimulus to around two years.