Dollar extends its rally against commodity currencies and yen today. Meanwhile, the greenback continues to consolidate against European majors in tight range. Dollar is supported by speculation that Fed would start signaling that rate hike is coming after next week's FOMC meeting. There was dissent among FOMC members on the language of forward guidance and both hawks and doves watched some form of re-write. In particular, markets will focus on whether Fed would drop "considerable time" from sentence of "maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends". In that case, it would be a strong signal that Fed is really ready for interest rates normalization soon.
Technically, euro stabilized from last week's ECB triggered selloff while Sterling also took a breathe from the Scotland uncertainty selloff. Swiss Franc is steady supported by talk of negative rates adoption by SNB. But after all, outlook in these currencies remained negative against dollar. Selling focus has turned to commodity currencies and yen this week. Among them, Aussie is the weakest, followed by yen, and then Kiwi and Lonnie.
In Europe, ECB president Draghi urged governments to boost investments or, "we will weaken the economy in the short run and undermine its prospects in the long run." He noted that even though ECB launched massive stimulus, "only if structural, fiscal and monetary policies go hand in hand will the euro area see investment return." Regarding ECB's policy, Draghi said the size of the purchase of ABS and covered bonds would have a "sizable impact on our balance sheet, which is expected to move towards the dimensions it used to have at the beginning of 2012." Back then, the size was between EUR 2.7-3.0T, comparing to the current EUR 2T.
In UK, the latest "better Together" poll showed "No" to Scottish independence is having a small lead of 52% to "Yes" 48%. Lloyds Banking group said that it will move the headquarter from Edinburg to London in case of Scottish independence. Lloyds said in a statement that "while the scale of potential change is currently unclear, we have contingency plans in place which include the establishment of new principal legal entities in England." Royal Bank of Scotland also said it will move its headquarter to England in that case. RBS said that "there are a number of material uncertainties arising from the Scottish referendum vote which could have a bearing on the bank's credit ratings, and the fiscal, monetary, legal and regulatory landscape to which it is subject."
On the data front, New Zealand business NZ manufacturing index rose to 56.5 in August. UK construction output, Eurozone industrial production and employment will be released in European session. But today's main focus is on US retail sales, which is expected to show 0.4% growth in August, with ex-auto sales up 0.3%. US will also release import price index, U of Michigan sentiment and business inventories.