Markets consolidated after yesterday’s surge in risk with the dollar trading softer ahead of key events.

While the European Central Bank's rate announcement is not likely to have a profound impact as the bank is widely expected keep rates at their current level of 1 per cent, the press conference to follow may stir the markets. We will be looking for European Central Bank President Trichet to address the bank’s decision on lending facilities as well as provide an updated economic forecast. The US labor situation is back in focus as investors seemingly disregarded yesterday’s negative ADP employment number amid a wave of better than expected data. The ADP print of 10,000 cuts from the prior 37,000 was the first negative reading since January of this year. It is also of note that weekly initial jobless claims remain at elevated levels with the four-week moving average at the highest level of the year around 486,000. Foreshadowing by the disappointing ADP print and heightened level of weekly claims may not be a good sign for Friday's (3 September) job report. 
 
Elsewhere, the Riksbank hiked interest rates as expected by 25 basis points to 0.75 per cent maintaining a hawkish outlook leading the market to believe additional tightening is ahead this year. The krona strengthened as US$/SEK slipped from session highs around 7.3235 to make lows near 7.2500. Swiss GDP for the second quarter grew faster than expected at 0.9 per cent while the market was expecting 0.8 per cent. The prior reading of 0.4 percent was revised higher to 1 per cent. The franc appreciated following the announcement as €/CHF fell below 1.2950 from session highs around 1.3040 and has since recovered to around 1.2980. US$/CHF dropped from about 1.0185 to just above 1.0100 on Swiss franc strength. Asian equities extended yesterday’s gains and the Nikkei 225 closed back above the key 9,000 mark with a gain of roughly 1.52 per cent. As of now European bourses are mostly trading lower.