NEW YORK: The dollar gained on Monday as US President Donald Trump prepared to host talks on ending Russia’s war in Ukraine, and traders pared bets on a September rate cut before a speech on Friday by Federal Reserve Chair Jerome Powell.
Trump will meet Ukrainian President Volodymyr Zelenskiy on Monday before holding talks with the leaders of Britain, Germany, France, Italy, Finland, the European Union and NATO, the White House said.
The European leaders were heading to Washington to show solidarity with Ukraine and to press for strong security guarantees in any settlement of the war in Ukraine.
Traders are also focused on Powell’s appearance later this week at the US central bank’s annual economic policy symposium in Jackson Hole, Wyoming for any new indications on whether a rate cut is likely next month.
Powell has said he is reluctant to cut rates on expectations that Trump’s tariff policies will lead to higher inflation this summer.
Traders pared bets on a cut at the Fed’s September 16-17 meeting after producer price inflation was hotter than expected in July. They had ramped up bets on a cut after consumer price inflation data for last month showed limited pass through from the trade levies.
Fed fund futures traders are now pricing in a 85% probability of a September rate cut, after last week briefly fully pricing in a move.
Powell is unlikely to lock himself into a monetary path before seeing August’s round of data.
“I don’t think that he can be definitive after being so cautious for so long. But I do think he has a clear opening on the labor market,” said Lou Brien, strategist at DRW Trading in Chicago.
“If the labor market weakens, he can move on that without having to wait for inflation, and that has historically been the way the Fed goes. They talk tough on inflation. They react to the labor market. The last jobs number was weaker than expected, the revisions were weaker than expected, and that makes it more than one report,” Brien said.
The euro was last down 0.21% on the day at $1.1673. Against the Japanese yen, the dollar strengthened 0.46% to 47.85.
Sterling weakened 0.1% to $1.3538.
In cryptocurrencies, bitcoin fell 1.66% to $115,764.
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