Dollar Mildly Higher After Mixed Fed Messages

The dollar was mildly higher overnight after mixed messages from Fed officials. New York Fed Dudley emphasized that the US economy is facing pulling forces from opposite directions, that is, "improving economic fundamentals versus fiscal drags and somewhat tighter financial conditions". And he emphasized it still needs the support of a, "very accommodative monetary policy". He urged officials to push against the headwinds "forcefully". And he'd like to see "continued improvement in the labour market" before cutting the pace of asset purchases. Meanwhile, Atlanta Fed Lockhart said he's supportive to FOMC's decision to keep the asset purchase pace unchanged in the September meeting. He noted there have be, "some slowing" in job market growth. And, between now and October, there won't be, "accumulation of enough evidence" to change the economic outlook.

However, Dallas Fed Fisher said Fed's delay in tapering could threaten Fed's credibility. He said he warned during the last FOMC meeting that, "doing nothing at this meeting would increase uncertainty about the future conduct of policy and call the credibility of our communications into question." Meanwhile, he criticized that White House has mishandled Fed chairman nomination terribly. And he also criticized that the front runner Yellen as, "dead wrong on policy".

While the greenback recovered mildly, momentum is so far very weak. Against European majors, it's stuck in tight range and stays bearish in near term. Against commodity currencies, it's staying near term bearish too. Against the yen, it's being neutral for the moment, thanks to the yen's own weakness and would likely engage in more sideway trading.

In the Eurozone, ECB president Draghi struck a dovish tone yesterday and said the central bank is ready to have another LTRO, or other instrument to keep short-term money markets rates low. He warned that bank's repayment of central bank credit could result in, "excess liquidity can reinforce upward pressures on term money market rates." And ECB will, "remain particularly attentive to the implications that these developments may have for the stance of monetary policy."

SNB president Jordan said that the Swiss Franc is still a "highly valued currency" and the cap remains an "indispensable too" to limit downside risks. Meanwhile, he noted that monetary policy could be used to "damp cyclical fluctuations" but not for "short-term fine-tuning" of the economy.

Looking ahead, German Ifo is the main focus in European session and is expected to show general improvements in September. UK will release BBA mortgage approvals. Later in the day the US will release house price indices and consumer confidence while Canada will release retail sales.