Markets continue to play the waiting game and the major currencies are idling in a calm, range trading environment ahead of Friday’s Powell comments, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

USD slips modestly but holds trading range

"The US Dollar (USD) is a little softer overall. European stocks are slightly firmer while US equity futures are mixed to slightly lower around retail sector earnings releases. Core bond markets are slightly firmer after yesterday’s dip. Despite the quite intense focus on the Jackson Hole event for rates and FX traders, there is little sign that markets are preparing or positioned for significant news."

"Market participation appears light and short-term FX volatility is weakening—broader gauges of short-term USD volatility are the lowest in a year, one Bloomberg report notes this morning. A sub-plot to this development is that risk reversal pricing also suggests some, modest, moderation in broader dollar bearishness has developed over the past week or so. Market developments suggest little concern that Powell will indicate the risk of a more aggressive easing than swaps are already pricing in."

"The data calendar is light. There are only Housing Starts and Building Permits on the US calendar this morning; both are expected to extend the generally soft trend seen recently. Bowman (dovish dissenter) speaks at 10ET on Bloomberg TV and again 14.10ET at a Blockchain symposium. Japan releases Trade and Core Machinery Orders data this evening. The RBNZ policy decision (22ET) is expected to result in a 25bps cut in the cash rate to 3.00%. DXY resistance is 98.30/50, with support at 97.70/80."