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Investing.com - The U.S. dollar slipped lower Tuesday, handing back earlier gains amid caution following the conclusion of the White House summit on Ukraine.
At 04:40 ET (08:40 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.1% lower to 97.920, after gaining slightly overnight.
Dollar in tight range
U.S. President Donald Trump told President Volodymyr Zelensky on Monday that the United States would help guarantee Ukraine’s security in any deal to end the war with Russia.
While this is welcome news, a great deal of uncertainty still exists, particularly as there has been no ceasefire agreed and Ukraine’s air force said on Tuesday that Russia launched 270 drones and 10 missiles overnight in one of its largest attacks this month.
The most significant sticking point is the land that Russia has occupied in fighting, which Ukraine wants back.
“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, in a note.
Away from geopolitical considerations, traders are also wary ahead of the Federal Reserve’s Jackson Hole symposium later this week, with Chairman Jerome Powell set to speak on the economic outlook on Friday.
Ahead of this, Fed Governor Michelle Bowman, one of two dissenting voices favouring a rate cut at last month’s meeting, is due to speak later today.
Markets are indicating an 83% chance for a quarter-point rate cut at the Fed’s next policy meeting in September.
“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 after peace talks
In Europe, EUR/USD gained 0.1% to 1.1677, with the single currency gaining after the meeting of European leaders in Washington to discuss a 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 added.
That said, if a Ukraine deal is reached that involves European countries taking up the burden, a relief rally could result in outflows from the euro and the pound.
GBP/USD traded 0.1% higher at 1.3520, gaining ahead of the release of key inflation data on Wednesday.
“We expect both headline and services inflation to accelerate, to 3.7% and 4.8%, respectively,” said ING. “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
Elsewhere, USD/JPY traded 0.1% lower to 147.67, USD/CNY slipped slightly to 7.18283, and AUD/USD dropped 0.1% to 0.6485 in thin trading.
Traders are trying to navigate geopolitical risks around potential Russia-Ukraine talks and looked toward the Federal Reserve’s Jackson Hole symposium for direction.