The U.S. dollar slipped slightly on Tuesday, giving back earlier gains as investors remained cautious following the White House summit on Ukraine.
By 04:40 ET (08:40 GMT), the Dollar Index, which tracks the greenback against six major currencies, was down 0.1% at 97.920, retreating from modest overnight gains.
Dollar Holds in Narrow Range
President Donald Trump told Ukrainian President Volodymyr Zelensky on Monday that the United States would support Ukraine’s security in any agreement to end the conflict with Russia.
While this announcement offers some reassurance, uncertainty lingers, particularly with no ceasefire in place. Ukraine’s air force reported Tuesday that Russia had launched 270 drones and 10 missiles overnight, marking one of its largest strikes this month.
The key issue remains the territory currently held by Russian forces, which Ukraine aims to recover.
“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,” said analysts at ING.
Away from geopolitical developments, investors are also monitoring the Federal Reserve’s Jackson Hole symposium later this week, where Chairman Jerome Powell will deliver remarks on the economic outlook.
Earlier, Fed Governor Michelle Bowman, one of two dissenting voices favoring a rate cut at last month’s meeting, is scheduled to speak. Markets currently price in an 83% likelihood of 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 Gains Amid Peace Talks
In Europe, the euro rose 0.1% to 1.1677 after discussions among European leaders in Washington regarding a potential peace deal for Ukraine.
“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, if European countries bear more responsibility under a Ukraine deal, a relief rally could lead to outflows from both the euro and the pound.
GBP/USD rose 0.1% to 1.3520 ahead of Wednesday’s key inflation report.
“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.”
Quiet Trading in Asia
In Asia, USD/JPY fell 0.1% to 147.67, USD/CNY edged down to 7.18283, and AUD/USD dipped 0.1% to 0.6485 amid thin trading.
Investors are navigating geopolitical risks around potential Russia-Ukraine talks and are looking to the Federal Reserve’s Jackson Hole symposium for direction.
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