US stocks continued to pull back overnight with Dow dropped -117.59 pts, or 0.69% to close below 17000 handle at 16906.62. Asian equities also opened lower. Meanwhile, dollar is mildly softer against other major currencies. Focus will mainly turn to FOMC minutes to be released later in the US afternoon. The strong employment data in June lifted the speculations that Fed could raise interest rates earlier than expected. That is, Fed could hike rates in spring of 2015, rather than fall. Nonetheless, the minutes from June's meeting could be a bit dovish as it might show that Fed is not in a hurry to remove policy stimulus. The minutes will also provide the background information for the forecast changes released after the meeting. Also, there could be some discussions regarding exit strategies.
Yesterday, Minneapolis Kocherlakota said he saw the probability of above target inflation over the next four years lower than below target. And, he's be willing to see inflation run above the 2% target for some time to bring employment back up more rapidly. And, more importantly, "there's no reason for us to raise rates as long as inflation is running too low." He emphasized that the "necessary condition" for raising the short term interest rates is inflation to be at 2% or above in the "one-to-two-year outlook".
Richmond Fed Lacker expected the economy to continue to grow at modest pace and inflation remained "well-behaved". But he emphasized that to maintain that "good performance" will require "withdrawing monetary stimulus at an appropriate time to prevent the emergence of inflationary pressures". And he noted that is "consistent with the FOMC's past practice of raising rates preemptively".
On the data front, UK BRC shop price index dropped -1.8% yoy in June. Japan money stock M2 and CD rose 3.0% yoy in June. Australia Westpac consumer sentiment rose 1.9% in July. China CPI slowed to 2.3% yoy in June while PPI dropped -1.1% yoy. Canada will release housing starts today while main focus in US will be FOMC minutes.