As anticipated, the release of the Fed policy meeting minutes were the key directive overnight, with the ensuing reaction across currencies showing the prospect of a third round quantitative still very much on the table. Although members remain cautious of the implications, the minutes show support for further asset purchases while once again floating the idea of providing explicate guidelines on how future economic performance may shape policy decisions. "Many members judged that additional monetary accommodation would likely be warranted fairly soon unless incoming information pointed to a substantial and sustainable strengthening in the pace of the economic recovery."

This willingness from the FOMC to keep QE in their armoury saw investors once again recalibrate stimulus expectations, inducing notable losses from the greenback. The most pronounced move came from the USDJPY pair which slid over 1-percent in the ensuing period while the Euro, sterling, and commodity bloc currencies also received a solid leg-up by default. The Euro broke the upside of key short-term resistance at 1.2485/90 region, exacerbated by light liquidity amid existing support as a shorts continue to be unwound in anticipation of ECB policy action. The Australian dollar regained its lustre making a sharp move above 105-figure, but continued to be outpaced by other major counterparts, led by the Japanese Yen.

With each new data point or Fed correspondence released we're seeing markets recalibrate stimulus expectations with immediate and decisive moves from the greenback suggesting markets have little in the way of conviction over the Fed's next move. Its clear markets are consumed with central bank easing expectations from both sides of the Atlantic and every data pulse has investors crossing the veritable minefield in an attempt to pre-empt central banks. Before the next policy meeting in September, markets will be closely watching the Fed's latest economic assessment at the Jackson Hole conference on August 31, with the hope Fed Chairman Ben Bernanke will use the event as a platform to signal QE3. Between now and then, market participants are on high alert looking for any under-performing top-tier data point's to increase the chances.

Economic data from China today will shape the local unit's short-term fortunes with the HSBC flash manufacturing PMI on the docket. A move above  the expansionary level of  '50'  is likely to fuel further short-term upside momentum. Also on today's docket we have China's conference board leading index. At the time of writing the Australian dollar is buying 105.05 US cents.

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