In what appeared to be a largely risk-neutral and lethargic offshore session, markets continued to tread water ahead of major forthcoming event risk such as the Fed's annual Jackson Hole summit, FOMC meeting, and further feedback on ECB easing initiatives. On balance, it was a rather unspectacular session with little in the way of top-tier themes to spark a convincing change in risk trends one way or the other, amid extremely low liquidity.

The Aussie dollar maintained a tight 35 pip range against the greenback with price action consolidating around current levels of 104.5 US cents. Support for the Euro remained in play despite moderate losses across European equities and further criticism from Germany's central bank over the proposed ECB bond buying operations.  There has also been talk the European Central Bank may place limits on peripheral debt yields, which was quickly refuted by the bank.

This backdrop of relative calm may be a welcome change but with a series of top-tier game changes on the horizon, it may simply be the calm before the storm. Wednesday's release of the Fed minutes from the August 1st meeting is sure to attract the usual level of stimulus related conjecture ahead of the Jackson Hole, and a speech by Atlanta Fed President Dennis Lockhart and current FOMC voting member will also be closely watched this evening as markets attempt to gather intelligence on the likelihood of further stimulus. Euro-group President Jean-Claude Juncker will also meet Greek Prime Minister Antonis Samara in Athens this week, amid speculation Greece will seek more time to implement agreed austerity measures as part of their bailout conditions.

The highlight of the local session will be the RBA minutes from their August 7 policy meeting, which saw Governor Stevens and Co hold benchmark rates steady at 3.5 percent. While acknowledging the significant challenges from the euro region amid a subdued global growth outlook, on balance, the statement painted a fairly positive picture. On China, the statement noted growth has moderated to a more sustainable pace, but "does not appear to be slowing further." Local inflation is expected to be in line with expectations and business credit has recorded its strongest growth in several years. On the Australian dollar, the bank highlighted the local unit's resilience despite a marked decline in the terms of trade and weaker global growth outlook. This point was further emphasized in the later release of the RBA Statement on Monetary Policy which also acknowledged the role a strong currency has played in dampening domestic growth and weighing on non-resource industries and employment. In short, the board considers the high exchange rate places "important risks" on the domestic conditions. This represents a change in language from previous RBA commentary, with the emphasis now on the disparity between fundamental drivers and Aussie dollar demand. Any elaboration on this today may serve as a reminder the Reserve Bank has their eye on high exchange rate, in turn reigniting the debate on how the bank will mitigate these "important risks". At the time of writing the Australian dollar is buying 104.5 US cents, short-term supported is noted around 104/104.1 US cents with a further leg-lower likely to be slowed around the 103.8 US cent region.

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