The U.S. dollar remained mostly steady on Monday as traders prepared for several important upcoming events: the release of July’s U.S. Consumer Price Index (CPI), the meeting between Presidents Donald Trump and Vladimir Putin, and the looming deadline for a trade deal between Washington and Beijing.
By 04:05 ET/08:05 GMT, the Dollar Index, which measures the greenback against a basket of six major currencies, inched up slightly to 98.050, recovering somewhat after sharp declines last week.
July CPI in focus
Since the release of a weak payroll report earlier this month, the dollar has faced pressure, raising expectations that the Federal Reserve will reduce interest rates at its September meeting. Currently, markets are pricing in over a 90% probability of such a cut.
Attention now shifts to Tuesday’s July consumer price data, with economists and policymakers cautioning that tariffs imposed by the Trump administration may accelerate inflation.
“Consensus is expecting another acceleration in core CPI, to 0.3% month-on-month (3.0% year-on-year), in this week’s July print,” noted analysts at ING in a report. “That is a number that can probably be seen as acceptable for the Federal Reserve to proceed with a September cut, given the backdrop of a significantly weaker jobs market.”
Trade negotiations between the U.S. and China are also under scrutiny as the August 12 deadline for a tariff deal approaches. Both sides aim to finalize an agreement to prevent the imposition of triple-digit tariffs on goods.
Market sentiment favors an extension of the truce, especially after reports over the weekend from the Financial Times that chipmakers Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD) have agreed to give the U.S. government 15% of their revenue from sales of chips to China.
Euro supported by Ukraine talks
In Europe, the euro gained 0.1% against the dollar to 1.1651, buoyed by hopes that the upcoming meeting between Presidents Putin and Trump may pave the way for a ceasefire in Ukraine.
“The considerable uncertainty surrounding the outcome and the reduced G10 FX sensitivity to the Ukraine conflict limit the case for significant adjustments to our EUR view at this time,” ING analysts added.
The British pound traded flat at 1.3451 ahead of Tuesday’s crucial employment report. A survey by the Chartered Institute of Personnel and Development revealed that UK private sector hiring intentions fell to their lowest since the pandemic, with just 57% of employers planning to recruit in the next quarter, down slightly from 58% in the previous survey.
Yuan weakens ahead of trade talks
The Chinese yuan edged lower against the dollar, with USD/CNY at 7.1830 after weekend data showed inflation remained subdued in July. Consumer prices were flat, while producer price inflation contracted more than expected, signaling weakening momentum despite Beijing’s recent stimulus efforts.
Trade relations between China and the U.S. remain in the spotlight as both countries approach the August 12 deadline for a lasting tariff truce. Earlier this year, Washington and Beijing agreed to temporarily ease tariffs, with hopes of reaching a permanent deal. President Trump hinted last week at a possible extension of the deadline, as talks between the two economic giants continue.
Other currency moves
The Japanese yen fell 0.1% to 147.63 against the dollar amid light trading while Japan observes a public holiday. Meanwhile, the Australian dollar slipped 0.1% to 0.6519 ahead of the Reserve Bank of Australia’s meeting on Tuesday, where a rate cut is widely expected following a surprise hold in July.
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