The U.S. dollar eased on Tuesday, surrendering some earlier gains as markets exercised caution following the White House summit on Ukraine.
At 04:40 ET (08:40 GMT), the Dollar Index, which measures the greenback against a basket of six major currencies, was down 0.1% at 97.920 after modest overnight gains.
Dollar Moves in Narrow Band
U.S. President Donald Trump told Ukrainian President Volodymyr Zelensky on Monday that the United States would help guarantee Ukraine’s security as part of any deal to end the conflict with Russia.
While this is positive news, uncertainty remains high, particularly as no ceasefire has been agreed. Ukraine’s air force reported Tuesday that Russia launched 270 drones and 10 missiles overnight, marking one of the largest attacks this month.
The main sticking point continues to be the territory Russia occupies, which Ukraine is determined to reclaim.
“While the path to peace in Ukraine appears somewhat clearer following last Friday’s and Monday’s summits, markets remain cautious. This is understandable, given that the most challenging negotiations – particularly over territorial issues – are still ahead of us,” analysts at ING said in a note.
Traders are also cautious ahead of the Federal Reserve’s Jackson Hole symposium later this week, where Chairman Jerome Powell is scheduled to address the economic outlook on Friday.
Before that, Fed Governor Michelle Bowman, one of two dissenting votes favoring a rate cut at last month’s meeting, is due to speak later today. Markets currently assign an 83% probability to a 25-basis-point rate cut at the Fed’s September policy meeting.
“We suspect the dollar may lose some support as we approach tomorrow’s FOMC minutes – the risk is more than two members voicing openness to cuts – and Jackson Hole,” ING added.
Euro Rises on Peace Hopes
In Europe, the euro gained 0.1% to 1.1677 following discussions among European leaders in Washington regarding a potential Ukraine peace deal.
“We see some upside risks from here through the rest of the week in EUR/USD. A return above 1.1700 remains quite possible before the end of this week,” ING noted.
However, should a Ukraine agreement place financial responsibilities on European countries, a relief rally could trigger outflows from the euro and pound.
GBP/USD traded 0.1% higher at 1.3520, gaining momentum ahead of Wednesday’s key inflation data release.
“We expect both headline and services inflation to accelerate, to 3.7% and 4.8%, respectively,” ING said. “That should consolidate markets’ recent hawkish repricing in the Sonia curve. Bets on another cut by year-end briefly dropped below 50% yesterday – currently at 14bp.”
Calm Asian Trading
In Asia, USD/JPY slipped 0.1% to 147.67, USD/CNY edged down to 7.18283, and AUD/USD fell 0.1% to 0.6485 amid light trading.
Investors remain focused on geopolitical risks surrounding potential Russia-Ukraine negotiations and are looking to the Federal Reserve’s Jackson Hole symposium for guidance.
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