The U.S. dollar held firm on Monday as investors prepared for a busy week, featuring key events such as July’s U.S. Consumer Price Index report, the upcoming meeting between Presidents Donald Trump and Vladimir Putin, and a deadline for a trade agreement between the U.S. and China.
At 04:05 ET, the Dollar Index, which measures the greenback’s strength against six major currencies, inched up slightly to 98.050, stabilizing after sharp losses last week.
CPI data in focus
Following a disappointing jobs report early in the month, expectations have grown that the Federal Reserve will lower interest rates at its September meeting. Markets currently assign over a 90% probability to a rate cut.
Tuesday’s consumer price data for July is now center stage, with analysts and policymakers warning that tariffs imposed by the Trump administration may push inflation higher.
“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,” said ING analysts. “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 talks between the U.S. and China remain under close watch as the August 12 deadline approaches. Both sides are eager to avoid further tariff increases that could hit triple digits on goods.
The market largely expects the truce to be extended, especially after reports from the Financial Times revealed chipmakers Nvidia (NASDAQ:NVDA) and AMD (NASDAQ:AMD) have agreed to hand over 15% of their revenue from chip sales in China to the U.S. government.
Euro lifted by Ukraine peace hopes
In Europe, the euro gained 0.1% to 1.1651 against the dollar, supported by optimism that the talks between Presidents Putin and Trump could lead to 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 noted.
The British pound was mostly flat at 1.3451 as markets awaited Tuesday’s important employment figures. The Chartered Institute of Personnel and Development revealed that UK private sector hiring intentions dropped to their lowest since the pandemic, with only 57% of employers planning to recruit in the next three months, slightly down from 58% in the prior survey.
Yuan edges lower ahead of trade talks
USD/CNY slipped slightly to 7.1830 following weekend data showing subdued inflation in China for July. Consumer price inflation was flat, while producer prices fell more than expected, highlighting fading effects of Beijing’s stimulus measures.
Trade relations between China and the U.S. remain a focal point, with the August 12 deadline for a tariff truce drawing near. Earlier this year, both sides agreed to temporarily reduce tariffs, aiming for a longer-term deal. President Trump indicated last week he might extend the deadline as discussions continue.
Other currency movements
The Japanese yen declined 0.1% to 147.63 against the dollar amid light trading due to a public holiday in Japan. The Australian dollar slipped 0.1% to 0.6519 ahead of Tuesday’s Reserve Bank of Australia meeting, where a rate cut is widely anticipated following a surprise pause last month.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.