Dollar slips as markets digest Ukraine summit, await Fed comments
The euro and sterling rose about 0.2% each to $1.1686 and $1.3524, respectively. The Swiss franc rose 0.3% and the Japanese yen ticked higher as well.
U.S. President Donald Trump told his Ukrainian counterpart Volodymyr Zelenskiy on Monday that the United States would help guarantee Ukraine's security in any deal to end the war with Russia.
Both Trump and Zelenskiy said they hoped Monday's gathering would eventually lead to three-way talks with Putin.
The developments did little to give clear direction to foreign exchange markets while European equities gained and oil prices slid on Tuesday.
Given that European energy costs are relatively low and undisrupted, developments related to the Russia-Ukraine war are unlikely to be major market movers, said Samy Chaar, chief economist at Lombard Odier.
Many investors are away for summer holidays in the northern hemisphere contributing to thinner market liquidity. Analysts at MUFG reckon that if the talks prove successful in ending the conflict in Ukraine, it could provide more support for European currencies that have already outperformed this year.
On the macro front, markets are awaiting the Federal Reserve's annual symposium in Jackson Hole for any clues on the likely path of interest rates. Fed Chair Jerome Powell is due to speak on the economic outlook and the central bank's policy framework.
Powell is not expected to lock himself onto a monetary path before seeing August's round of data even though money market expectations of a rate cut next month remain above 80%, according to CME's FedWatch tool.
"The market is expecting signs that a cut in September is a done deal. I am not sure the market is going to get that," Chaar said.
The minutes of the Fed's July meeting are due later on Wednesday and could offer insight into policymakers' thinking about the trajectory of interest rates albeit the meeting took place before a weak labour market report prompted markets to price in cuts more aggressively.
"With inflation essentially stuck over the past year, the tariff passthrough that we still expect, and the labor supply story keeping the unemployment rate historically low, we still think there is a strong case for the Fed to remain on hold," analysts at BofA Global Research said in a note.
Cryptocurrencies were an exception to the otherwise mellow mood in markets, with bitcoin falling about 1% to notch a third straight day of declines after hitting a record high last week while ether was down 1.2% as well.
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