Amid quiet conditions, the dollar remains range-bound versus major counterparts, but this week’s FOMC meeting minutes and PMI data from China and the Eurozone could be catalysts that change that.

As the prime time for summer vacations, August is typically one of the quieter months in the foreign exchange market, and with no European or US data on the economic calendar today, we don't anticipate any big moves.

Major US dollar (USD) pairs including the EURUSD, GBPUSD, AUDUSD, and NZDUSD are all currently trading near one-month highs, and the main question this week is whether there will be enough momentum to sustain these moves.

In terms of data, there are enough top-tier economic reports to fuel further gains, but that could only happen if there are enough surprises in the data. The top three event risks this week will be the July Federal Open Market Committee (FOMC) meeting minutes, the HSBC China flash PMI manufacturing numbers for August, and the Eurozone PMI reports.

Speculation about tapering by the Federal Reserve drove US ten-year Treasury yields to two-year highs last week, but the rise in yields has not led to much movement in the US dollar. Part of the reason for that is the lack of liquidity this month, but recent US data disappointments have also made investors worry about the appropriateness of Fed tapering.

See related: More US Data That Muddies the Water

At the same time, positive economic reports from Europe, New Zealand, and even China have lent support to other major currencies, and in turn, have hampered the dollar rally.

FOMC Meeting Minutes Due Wednesday

There is officially only one month left before the September FOMC meeting, and the central bank is widely expected to reduce the amount of bonds purchased at that meeting. Based on the move in Treasuries, Wall Street expects the first reduction to be made next month, but the decision is not a done deal because recent US economic data has been weak, which makes investors particularly sensitive to the FOMC minutes and the Fed’s Jackson Hole summit this week.

We will be looking at the July FOMC minutes for potential details about the tapering process as well as the level of conviction within the central bank. We feel that, in general, the message from Fed Presidents has been clear and that most support some type of action over the next three months, with more leaning towards making a move sooner as opposed to later.

If the minutes are hawkish with more members supporting a move despite recent data disappointments, the US dollar could finally see some upside momentum, which could keep the EURUSD, GBPUSD, AUDUSD, and NZDUSD in their recent ranges.

As for the Fed’s annual Jackson Hole summit on Thursday and Friday, comments from policymakers could be interesting, but don't expect any fireworks since Fed Chairman Ben Bernanke won't be in attendance.

Chinese PMI Figures Due Thursday

Across the Pacific, we get the first glance of August Chinese manufacturing PMI numbers on Thursday. While the economy slowed in June, economic data improved in the month of July, and it will be important to see those improvements continuing into August.

Economists are looking for a stronger number, and if they are right about that, the Australian dollar (AUD) and New Zealand dollar (NZD) could extend their gains. If the consensus is wrong, however, and July proved to be a one-month bounce, it will be back to the ranges for both commodity currencies versus the US dollar.

Eurozone PMI Also Expected Thursday

Across the Atlantic, Thursday's Eurozone PMI numbers will be extremely important for the euro (EUR) because the currency’s resilience has been largely tied to recent upside surprises in Eurozone data. Manufacturing and service sector activity is expected to grow at a stronger pace in the month of August, and if the data is good enough, it could take EURUSD above the recent upper range boundary at 1.34.

By Kathy Lien of BK Asset Management