Dollar dithers as markets digest Ukraine summit, await Fed comments
The euro and sterling hovered between modest gains and losses against the dollar and were last up about 0.2% and 0.1% at $1.1683 and $1.3520, respectively. The Japanese yen and Swiss franc 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.
Trump made the pledge during a summit at the White House, where he hosted Zelenskiy and a group of European allies following his meeting on Friday in Alaska with Russian President Vladimir Putin.
The developments did little to give clear direction to foreign exchange markets while European equities posted modest gains.
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.
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.
Analysts reckon that he is unlikely 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.
Analysts at DBS expect Powell to deliver a calibrated message, "keeping the door open for an insurance cut to avert a sharper deterioration in the labour market while also cautioning against excessive or rapid rate cuts," they said in a note.
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.
Elsewhere, the Hong Kong dollar, which the city's de facto central bank allows to trade in a tight range of between 7.75 and 7.85 against the greenback, was one of the biggest movers, trading 0.3% stronger at 7.7944 to its U.S. counterpart as interbank rates surged to a three-month high.
Cryptocurrencies were an exception to the otherwise mellow mood in markets, with bitcoin falling 1.5% to notch a third straight day of declines after hitting a record high last week while ether was down 2.7% as well.
The Australian and New Zealand dollars were steady while the Swedish Krona rose 0.3% to 9.5360 per U.S. dollar.
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