Trump-Zelensky meeting ahead, Fed rate outlook in focus - what’s moving markets
Investing.com - The U.S. dollar edged higher Monday at the start of a week dominated by moves to try and end the war in Ukraine as well as the widely-watched Federal Reserve’s Jackson Hole symposium.
At 03:00 ET (08:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% higher to 97.890, after dropping 0.4% last week.
Zelensky heads to Washington
A meeting between U.S. President Donald Trump and Russian President Vladimir Putin late last week failed to result in a ceasefire in Ukraine, and now attention turns to a meeting between Trump and Ukraine President Volodymyr Zelensky in Washington later in the session.
Zelensky will be joined by some European leaders, and is likely to be pressured to agree to a settlement that has been viewed as favorable to Russia, including losing a chunk of its eastern Donetsk region.
Ukraine has previously rejected any notion of ceding land to Russia.
Trump said on Sunday that Zelensky could end the war with Russia ‘almost immediately’ by acquiescing 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.
Elsewhere, attention will turn to the Federal Reserve’s Jackson Hole symposium later this week, with Chairman Jerome Powell set to speak on the economic outlook and the Fed’s policy framework on Friday.
“It may be too early for Powell to all but confirm a Fed rate cut in September,” said ING. “Yet when the facts of a ’solid’ labour market change, Powell will have to acknowledge it.”
Markets are now pricing in around an 85% chance the Fed would ease rates by a quarter point next month, and Powell would have to be very hawkish to change the dial 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.
Euro trades in tight range
In Europe, EUR/USD slipped 0.2% to 1.1671, with the single currency trading in a tight range ahead of the meeting of European leaders in Washington to discuss a peace deal for Ukraine.
The economic data slate mainly consists of eurozone trade figures for June in Europe Monday, and the week’s highlight will be the August flash PMIs on 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,” said ING.
GBP/USD traded 0.1% lower at 1.3540, after gains of around 0.8% last week.
“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,” said ING.
“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 trading in Asia
Elsewhere, USD/JPY traded marginally higher at 147.22, after data on Friday showed that Japan’s economy expanded more than expected in the second quarter.
USD/CNY slipped slightly to 7.1803, with the yuan trading in a tight range after last week’s numbers showed that Chinese industrial production in July fell short of expectations, while retail sales figures also missed forecasts, raising calls for additional government stimulus.
AUD/USD gained 0.1% to 0.6516.