Dollar Soft Against Euro As FOMC Minutes Awaited

The dollar is remainng soft in the Asian session as markets are awaiting FOMC minutes to provide some more clarity on whether Fed will taper with the asset purchase program in September. EUR/USD took out a key near term resistance at 1.34 yesterday and is staying firm above this level so far today. Nonetheless, the greenback is firm against commodity currencies. The DOW pared all of initial gains and ended the day mildly lower by -7.75 pts and closed barely above 15000 level. The Asian markets are mildly higher in initial trading. 10-year yields retreated back to 2.814%. Gold and crude oil also dropped slightly lower to close at 1368 and 105 respectively.

For the moment, markets are expecting the Fed to taper to a $85 billion per month quantitative easing program in September, but that would likely be take in small steps; $10 billion reduction. Such expectations has pushed treasury yields to their highest level in nearly two years. Meanwhile, the DOW dropped more than 4% since early August. Today's FOMC minutes might reveal that policy members are more upbeat on their economic outlook, and acknowledge the improvements in the labor markets.

But firstly, the Fed will most likely reiterate the difference stances held regarding interest rates and asset purchases. That is, while tapering could start later this year, rates might be held low for an extended period of time. Secondly, the minutes will likely show policy makers being noncommittal to September tapering and in need positive economic data to confirm the stance. In conclusive messages from the minutes today will not alter the expectation of September tapering. However, the dollar may reverse back to recent weakness should the minutes signal that the Fed would hold on to the asset purchase for a longer period of time.

On the data front:

Australia Westpac leading index was flat mom in June. UK public sector net borrowing, CBI trends total orders will be released in European session. Existing home sales from US will be featured in US session.