Asian session: Demand for the euro was limited

Demand for the euro was limited before Spain sells bonds today for the first time since European Central Bank President Mario Draghi pledged to do whatever it takes to defend the euro, suggesting the bank may intervene in bond markets. Investors and politicians are clamoring for ECB action to quell a sovereign debt crisis that’s threatening to cripple Spain and Italy and risk a rupture of the trading bloc. Spain is among five euro states that have sought bailouts from the European Union, including Cyprus which was downgraded by Standard & Poor’s today. Demand for the common currency was also limited after S&P lowered Cyprus’ long-term credit rating to BB from BB+ and placed it on CreditWatch with negative implications, citing short-term financing pressures. The ratings company affirmed its stable outlook for Germany’s top AAA grade.

ECB officials meeting in Frankfurt will keep the benchmark interest rate at a record low 0.75 percent, according to 51 of 55 economists in a Bloomberg News survey. Four predict a cut to 0.5 percent. The deposit rate will be left at zero, another poll shows. Spain is due to sell debt today maturing in 2014, 2016 and 2022.

The greenback remained higher versus the yen after the Federal Reserve refrained from monetary easing. The Federal Open Market Committee “will provide additional accommodation as needed to promote a stronger economic recovery and sustained improvement in labor market conditions in a context of price stability,” it said yesterday in a statement at the end of a two-day meeting in Washington. Investors had speculated it might signal a third round of asset purchases under quantitative easing, or QE.

Australia’s dollar gained after data showed an increase in retail sales. Retail sales in Australia climbed 1 percent in June after a revised 0.8 percent advance in the previous month, the Bureau of Statistics said today. Economists predicted a 0.8 percent advance. The nation had a trade surplus of A$9 million ($9.4 million) in the same period, compared with estimates for a A$375 million shortfall, a separate report showed.

EUR / USD: during the Asian session the pair was trading in range $1.2215-$1.2250.

GBP / USD: during the Asian session the pair was trading in range  $1.5520-$1.5545.

USD / JPY: during the Asian session the pair rose to a week's high.

UK Markit/CIPS Construction PMI data is due at 0830GMT, but there is still a striking disconnect between these numbers and the official construction growth figures. The ECB decision is due at 1145GMT, while ECB President Mario Draghi will hold the usual press conference from 1230GMT. The Bank of England decision is due at 1100GMT and while the near consensus view is there will be no change of policy the risks of further easing at this meeting are far from negligible.  US data continues at 1230GMT with the weekly initial jobless claims,  which are expected to rise 17,000 to 365,000 in the July 28 week after sharp movements in previous weeks due to seasonal adjustment

difficulties. At 1300GMT, the US Chamber of Commerce presents a quarterly economic briefing by Chief Economist Martin Regalia. US data