The U.S. dollar edged higher on Monday as markets braced for a week dominated by diplomatic efforts to resolve the Ukraine conflict and the Federal Reserve’s closely watched Jackson Hole symposium.
At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against six major currencies, rose 0.2% to 97.890, rebounding from a 0.4% decline last week.
Zelensky Travels to Washington
Following last week’s meeting between U.S. President Donald Trump and Russian President Vladimir Putin, which failed to produce a ceasefire in Ukraine, attention now turns to Washington. There, Trump will meet with Ukrainian President Volodymyr Zelensky, joined by several European leaders. Zelensky may face pressure to accept a settlement that could favor Russia, including relinquishing part of the eastern Donetsk region.
Ukraine has previously dismissed any proposals to cede territory. Trump said on Sunday that Zelensky could end the war with Russia “almost immediately” by agreeing to Moscow’s demands.
“Ukraine and Europe have made security guarantees (including those from the U.S.) central to any path toward peace. Any further clarification of this situation today could be welcomed by markets, even though the issue of territory seems intractable,” noted analysts at ING.
Focus Shifts to Jackson Hole
Later in the week, markets will look to the Federal Reserve’s Jackson Hole symposium, where Chairman Jerome Powell is scheduled to speak on the economic outlook and policy framework on Friday.
“It may be too early for Powell to all but confirm a Fed rate cut in September,” ING said. “Yet when the facts of a ’solid’ labor market change, Powell will have to acknowledge it.”
Markets currently price in roughly an 85% probability of a 25-basis-point rate cut next month, meaning Powell would need to adopt a very hawkish stance to alter expectations significantly.
“With risk assets supported and energy prices soft, we expect the dollar to remain under mild pressure as dollar-based investors continue deploying capital,” ING added.
European Currencies Trade in Narrow Ranges
In Europe, EUR/USD fell 0.2% to 1.1671, trading in a narrow band ahead of the meeting of European leaders in Washington to discuss a peace deal for Ukraine. Key European data on Monday includes eurozone trade figures for June, with the week’s highlight being August flash PMIs on Thursday.
“EUR/USD should remain mildly supported in the 1.1650-1.1750 range early in the week but could test 1.1830 if Powell delivers a sufficiently dovish message on Friday,” ING analysts said.
GBP/USD slipped 0.1% to 1.3540 after rising roughly 0.8% last week.
“This reflects credible hawkish signals from the Bank of England, which now has the market pricing just 50 basis points of additional easing. By comparison, the Fed is expected to ease roughly 125 basis points through 2026,” ING added.
“This dynamic should keep GBP/USD supported this week, where a break above 1.3585/3600 could see levels reach 1.3680/3700 by week’s end.”
Quiet Trading in Asia
In Asia, USD/JPY inched higher to 147.22 after data on Friday showed stronger-than-expected Q2 growth in Japan. USD/CNY edged down to 7.1803, trading in a narrow range after July industrial production and retail sales fell short of expectations, prompting renewed calls for government stimulus. AUD/USD gained 0.1% to 0.6516.
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