The U.S. dollar held steady during Monday’s trading ahead of the anticipated meeting between the U.S. President and his Ukrainian counterpart, while investors looked to the Federal Reserve’s Jackson Hole symposium for fresh signals on the central bank’s policy outlook.
Currency movements were relatively calm during the Asian session, with last week’s dollar decline coming to a halt as traders scaled back bets on a substantial Fed rate cut next month.
The euro was steady at $1.1704, while the British pound inched up 0.1% to $1.3563. Meanwhile, the U.S. Dollar Index, which tracks the greenback against a basket of major currencies, stabilized at 97.85 after losing about 0.4% last week.
Markets are currently pricing in an 84% chance of a 25 basis point rate cut by the Fed next month, down from 98% a week earlier. The shift followed stronger than expected data, including a rise in wholesale prices and a notable increase in July retail sales, which dampened expectations of a larger 50-basis-point cut.
A chief economist at a U.S. bank noted: “The economic data are not all pointing in one direction, but the U.S. economy appears to be in good shape during the third quarter. It is likely the Fed will cut rates before year-end, whether in September as markets expect, or later depending on conditions.”
Fed Chair Jerome Powell is scheduled to deliver a speech at the Jackson Hole symposium, set for August 21–23, in which he will address the U.S. economic outlook and the central bank’s policy framework remarks that will be closely watched by markets.
The head of international economics at an Australian bank added: “Powell is also likely to touch on current U.S. economic conditions, which will be more directly relevant to monetary policy and of greater importance to markets. Since markets are already pricing in a very high probability of a September rate cut, the risk is that his tone may come across as hawkish, or be perceived as such, if he delivers a balanced assessment of the U.S. economy.”
In other currency markets, the dollar rose 0.14% against the Japanese yen to 147.37, after slipping about 0.4% last week.
On Friday, the Japanese government brushed aside unusually blunt comments from the U.S. Treasury Secretary, who said the Bank of Japan was “behind the curve” in its policy response remarks seen as an attempt to pressure the BOJ into raising interest rates.
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