FX round-up: Calm ahead of ECB, BoJ storm?

A fairly quiet day of trading was seen today with a string of medium impact data released from the U.S. with the main focus being on housing and building.

Month on month building permits were up in June with a reading of 7.4% from a previous of -4.9%. Housing starts also had a decent boost in June with 1.215K residential projects starting, up from May which had a reading of 1.222K.

Somewhat lacklustre trading was seen for Cable with the pair opening at 1.3036 and only managing a small move lower to 1.3030 by 17:00 BST. Rate hike bets fading could also be a cause for the slight slip in the pound. Thursday sees the release of key retail sales figures for June which could prove to be the key driver for Sterling moves tomorrow.

Against the Euro the dollar also performed marginally well, starting the European session at 1.1550 managing to gain some ground lower to 1.1520 by 17:00BST.

With the ECB rate decision out tomorrow, traders will be looking to keep their powder dry to a certain extent and be keen to pick on any hint from ECB president Draghi with regards to a possible increase in the pace of and/or duration of their asset purchases, even though minutes from their last meeting indicated that they were keen to “avoid any signals that could trigger a premature tightening of financial conditions”.

Further clues on this may be seen in the Jackson Hole Symposium in August were possible policy shifts might be seen, but Draghi will still have his work cut out for him keeping the wolves at bay in tomorrow’s press conference.

Thursday will also see the release of key data for Japan including y/y exports and most pertinent, the BoJ policy statement and press conference. Prime Minister Shinzo Abe has seen public confidence in him wane on the back of the Moritomo Gakuen school debacle back in May where it is alleged that his wife, Akie, donated 1 million yen to the school in 2015. Critics seized the opportunity to raise doubts over the government’s decision to sell the state-owned land at a near 90 percent discount.

The yen has strengthened against the USD since 11 July, where it was trading at an area of 114, and has continued to do so, trading at 111.74 by 17:05 BST today.

Market participants will be paying close attention to the BoJ press conference tomorrow (07:30 BST) for clues in any policy shifts.