July Month End Talk, Looking for August

The dollar ended with slight losses against the euro Monday but managed to carve out modest gains versus the yen on a day when overall dollar action was inconclusive and where trading activity was muted by month-end considerations.

Euro-dollar was trading around 1.2770 usd at US Afternoon time. Monday, up slightly from the 1.2755 usd level seen at the start of the U.S. trading day with the euro at the upper-end of its narrow 1.2741-83 usd US hours range.

Dollar-yen, meantime, was also near the upper-end of its U.S. hours range, trading at 114.70 yen after 114.19-114.74 yen intra-day.

Throughout the session, traders complained of extremely light trading flows, suggesting that the ultimate dollar change on the day was somewhat inconclusive, with markets hampered in part by month-end considerations and also by the build-up to a slate of market events that could lead to more volatile trading later in the week.

On Thursday, the European Central Bank and the Bank of England are both due to meet on interest rates, the ECB seen as likely to hike rates by 25 bps but the Bank of England likely to keep rates steady.

Friday brings the release of the all-important US payrolls report, this one for July, with traders reminding that the payrolls report has been difficult to forecast of late and thus brings the risk of additional rate volatility that day.

Ahead of that, traders will have to deal with other key data releases such as the Tuesday manufacturing index from the Institute for Supply Management (ISM), the non-manufacturing index from the same group, due Thursday, as well as US auto sales for July due Tuesday.

For month-end, traders said many trading accounts appeared to be keeping a low profile, with the impact of summer vacations now also taking their toll on the number of players watching the market action.