The US dollar extended its recent run of losses falling to a six month low against the euro and registering a new two month low against the pound.

In the absence of any notable data to drive foreign exchange markets, investors clearly remained cautious yesterday ahead of this evening’s Federal Reserve minutes as markets will once again look for indications as to when the central bank may start to pull back its asset purchasing program.

The US dollar extended its recent run of losses falling to a six month low against the euro and registering a new two month low against the pound.

In the absence of any notable data to drive foreign exchange markets, investors clearly remained cautious yesterday ahead of this evening’s Federal Reserve minutes as markets will once again look for indications as to when the central bank may start to pull back its asset purchasing program.

The euro drew support yesterday as data from EU statistics agency Eurostat showed that construction output grew by 0.7% in June, an improvement from the 0.5% rise in May. As mentioned above the euro traded to a six month high against the US dollar.

Capital Economics, a leading independent research company, has raised its growth forecasts for the UK to 1.2% from 0.8% for 2013 and for 2014 the forecasts have been raised to 2% from 1.5%. The group cites the recent string of improving economic data for justifying the rise in the forecasts and believes that strong growth will really take off from 2015.

The main focus will be the release of the minutes from the Federal Reserve’s meeting in July. We have seen the Fed be fairly mixed over the last few months as to the extent and the timing of when they will start to taper quantitative easing, so clarity will be sought this evening. Two other topics may also be bought up in the minutes; with speculation circulating that the Fed may talk about the prospect of raising interest rates and potentially lower the unemployment threshold that has been linked to monetary policy.

Data released this morning from the UK has disappointed as the UK’s public sector borrowing figures for July show that the UK’s deficit reduced but failed to live up to market expectations of the extent of the reduction. Analysts were expecting a surplus for July.

Key Announcements:

15.00pm – USD – Existing Home Sales (Jul): Expected to improve to 5.10mln.

19.00pm – USD – FOMC Minutes.