US Dollar
The summer months' lack of volatility is taking its toll on the dollar-backed majors.  Point in case, the EURUSD has traded within a 40-point range over the past 24 hours.  But aside from the odd trader taking his vacation, today's lack of momentum had a very real fundamental root.  From the indicator front, the final regional manufacturing read helped to solidify the uncertain nature of tomorrow's ISM read.  The headline figure for the Chicago PMI factory activity survey printed at 57.9, which was a better outcome than the expected contraction to 56.0 but not exactly a bullish flag from the usually volatile read.  Furthermore, any bidding potential that could have been offered from the overall read was sabotaged by the prices paid component.  According to the official release, the gauge measuring the prices paid for raw materials fell from 89.0 in June to 86.9, providing a hint of relief from the recent strength in separate inflation measures.  Instead of reacting to this lesser indicator's intricacies, traders decided to turn their attention to tomorrow's nationwide ISM figure.  Not only will the indicator provide a credible measure of manufacturing activity for the country, it also comes with respectable employment and prices paid reads of its own.  Another point of dissatisfaction for the market today, was the commentary from Fed presidents.  St. Louis Fed President William Poole, a non-voting member of the board, mentioned that he is personally split "50-50" over whether additional rate policy will be needed for August's meet.  He did however, mention that price stabilization is the Fed's primary concern when considering monetary policy, a comment that brought up Friday's PCE jump in more than a few minds.   On the other hand, San Francisco Fed President Janet Yellen (a voting member) stuck with her usual dovish commentary by saying the medium-term inflation should moderate with below trend growth.

Euro
A flurry of reports did little to boost the underlying Euro currency in the New York session as trading volume and activity remained light on the last day of July.  The day's docket included German retail sales data that was surprisingly to the upside as both Euro zone industrial confidence and consumer price index estimates improved.  For the month of June retail sales in the Euro zone's largest economy rose at a 1.9 percent monthly clip.  Boosted by World Cup retail spending, the current figure reverses the 2.2 percent drop witnessed in May, adding to better prospects of a 25 basis point rate hike at this week's upcoming European Central Bank meeting.  Industrial confidence also improved, rising to a printing of 4 versus consensus estimates of a 2 showing.  Coupled with a consumer price estimate report that showed a 2.5 percent consumer price increase in the month, the session's surveys are likely to purport policy making justification of rising inflationary pressures amid stronger prospective demand in the near term.  Considering President Jean Claude Trichet's hawkish stance as of late, the possibility of such a scenario ranks high.  As a result, the sentiment is likely to persist in the absence of any pertinent upcoming Euro data in the next 48 hours, potentially keeping the underlying range bound.  Taking a look ahead, it seems like clear sailing to the decision, set aside from the unemployment rate figure and a survey on producer prices.

British Pound
Trading was somewhat muted on the day in the British pound, in line with movements in the broader market.  Attributed to the lack of interest were less than stellar reports overnight, as we approach the Bank of England meeting later this week.  Released in the London hours, money supply figures continued to point to rising inflationary pressures in the economy.  Increasing at a 13.5 percent annualized clip, higher amounts of money are now chasing fewer goods, potentially boosting consumer price increases.  As a result, the sentiment is likely stirring the prospect of higher rates in the near term future as the short sterling curve prices in a definitive 25 basis point rate hike by the fourth quarter of this year.  Additionally boosting the possibility were the month's mortgage approvals.  Expected to increase by 117,000, the survey climbed by 120,000 in the month of June, continuing the uptrend witnessed over the last three months.  With approvals on the up-and-up, likely underpinning housing demand, central bankers may have little to no reason to raise rates as residential demand remains stable amid inflationary concerns.  At this point, only timing remains to be the final piece to the puzzle.  With three spots remaining to be filled, which is inevitable, the Monetary Policy Committee is likely to stand pat on rates until the seats are filled and economic data is completely overwhelming.  This notion should add some bearish concern on the underlying in the near term, even as the likelihood of a rate hike underpins demand in the longer term.

Japanese Yen
The Japanese yen continued its gains against the US dollar, albeit incrementally, throughout the New York session as economic reports remained positive for the world's second largest economy.  A focus in the overnight session, the industrial production survey reported higher productive activity in the month, rising 1.9 percent.  The figure improved upon the 1.3 percent decline seen in May and trumped the 1.3 percent consensus figure.  With speculation on the overall economic condition remaining somewhat 50-50, the report bodes well for the underlying currency as a testament of further expansion potential.  Additionally supportive were Yuan gains against the US dollar in the overnight.  With the yen continuing its proxy status for the Chinese denomination, further speculation over the prospects of a near term revaluation effort are boosting a yen bias.  Once again testing new lows below the 7.98 figure, the Yuan is rising in value as policy makers are making a concerted effort to preserve the value of the local currency by calling for a slow down in foreign investment.  However, the belief stands that with rising amounts of foreign money attempting to enter the economy and contracts trading at new lows, policy makers will ultimately relent and move for flexibility through a wider trading band in the near future.  Coupled with the recently acquired bearishness towards the US dollar, the yen may very well have some room left to rise.

Kathy Lien is the Chief Currency Strategist at FXCM.