The U.S. dollar inched higher on Monday as markets braced for a week shaped by efforts to resolve the Ukraine conflict and the highly anticipated Federal Reserve Jackson Hole symposium.
At 03:00 ET (08:00 GMT), the Dollar Index, which measures the greenback against six major currencies, rose 0.2% to 97.890 after last week’s 0.4% decline.
Zelensky heads to Washington
A late-week meeting between U.S. President Donald Trump and Russian President Vladimir Putin did not lead to a ceasefire in Ukraine. Attention now shifts to a gathering in Washington between Trump and Ukrainian President Volodymyr Zelensky, accompanied by several European leaders. Zelensky is expected to face pressure to accept a settlement that may favor Russia, potentially including ceding part of Donetsk in eastern Ukraine.
Ukraine has consistently rejected any proposal to relinquish territory. Trump remarked on Sunday that Zelensky could end the war with Russia “almost immediately” by yielding 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,” said analysts at ING in a note.
Focus on Jackson Hole
Later in the week, attention will turn to the Fed’s Jackson Hole symposium, where Chairman Jerome Powell is scheduled to discuss the economic outlook and policy strategy on Friday.
“It may be too early for Powell to all but confirm a Fed rate cut in September,” ING commented. “Yet when the facts of a ’solid’ labour market change, Powell will have to acknowledge it.”
Markets are pricing in roughly an 85% chance of a 25-basis-point Fed rate reduction next month, meaning Powell would need a sharply hawkish tone to shift expectations significantly.
“With risk assets bid and energy prices offered, we expect the dollar to stay under a little pressure as dollar-based investors continue to put money to work,” ING added.
Currency moves in Europe
EUR/USD fell 0.2% to 1.1671, trading in a narrow range ahead of the European leaders’ meeting in Washington on a potential Ukraine peace deal. Monday’s eurozone economic focus is June trade data, with August flash PMIs slated for Thursday.
“EUR/USD should stay gently bid in a 1.1650-1.1750 range through the early part of the week, but could make a run at the 1.1830 should Powell prove sufficiently dovish on Friday,” ING noted.
GBP/USD traded 0.1% lower at 1.3540 after last week’s roughly 0.8% gains.
“Driving that is newfound and credible hawkishness from the Bank of England, which now has the market pricing just 50bp of further easing. This compares to the approximate 125bp easing priced for the Fed through 2026,” ING said.
“This should keep GBP/USD bid this week, where a break of 1.3585/3600 could see 1.3680/3700 by the end of the week.”
Quiet Asian trading
In Asia, USD/JPY edged up to 147.22 after Friday’s data showed Japan’s economy expanded more than expected in Q2. USD/CNY dipped slightly to 7.1803, remaining in a narrow range following weaker-than-expected Chinese industrial production and retail sales in July, fueling calls for additional stimulus. AUD/USD rose 0.1% to 0.6516.
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