The capital markets have started the week on a subdued note, with Japanese markets closed for the Mountain Day celebration. Key events this week include the release of US and UK CPI data, and a meeting of the Reserve Bank of New Zealand, which could potentially result in the first rate cut.
Uncertainty about market positioning and the extent of the carry-trade may also be dampening activity. The yen and Swiss franc are the weakest among G10 currencies today, each down around 0.4%. Meanwhile, gold is trading higher for the third consecutive session, reaching $2445, and September WTI is continuing its recovery from last Monday's six-month low below $72 a barrel.

Asia Pacific Markets
The dollar stalled at the end of last week, closing softly near JPY146.60. With Japanese markets closed for a national holiday, the dollar has consolidated within the pre-weekend range. The Australian dollar's recovery from last Monday's yearly low lost momentum after briefly rising above $0.6600 before the weekend. It slipped back to $0.6565 today before attempting to re-challenge the $0.6600 area. Speculators have cut long positions in the Aussie futures market for the third consecutive week.

European Markets
The UK’s big week of data begins tomorrow with the latest jobs report, followed by Wednesday’s CPI release. The market is nearly evenly split on the prospects of another rate cut next month.

The euro has slipped over the past four sessions, falling from last Monday’s close of slightly above $1.0950 to a pre-weekend close of slightly above $1.0915. The euro has settled above $1.09 for six consecutive sessions, marking the longest such streak this year.
Sterling's price action is more positive than the euro’s, having posted a potential key reversal last Thursday. Modest follow-through buying ahead of the weekend brought it about 1.1 cents above Thursday’s five-week low, peaking at around $1.2780 today before easing back toward $1.2755.

American Markets
This is a crucial week for US high-frequency data, with Tuesday and Wednesday focusing on price data—first PPI, then CPI. Year-over-year rates are not expected to change significantly, aside from rounding. The second half of the week will spotlight the real economy, with retail sales and industrial production data. Outside of a rebound in auto sales following June’s computer glitch, retail sales and industrial production are expected to have slowed sharply at the start of Q3.

The US dollar settled near CAD1.3730 ahead of the weekend, marking its lowest close since July 18, following six consecutive declines. The greenback is trading quietly against the Canadian dollar today, with little change.