The US dollar declined against most major currencies on Tuesday, as markets continued to assess the results of the summit that brought together leaders from the United States, Europe, and Ukraine, while investors await the monetary policy signals expected from the Federal Reserve’s annual symposium in Jackson Hole at the end of the week.

Both the euro and the British pound recorded limited moves between gains and losses against the dollar, rising in late trading by about 0.2% and 0.1% to $1.1683 and $1.3520 respectively, while both the Japanese yen and the Swiss franc posted slight gains.

During the summit, US President Donald Trump assured his Ukrainian counterpart Volodymyr Zelensky that the United States would help guarantee Ukraine’s security in any agreement to end the war with Russia. This came during a meeting at the White House, which was also attended by a number of European allies, following Trump’s meeting with Russian President Vladimir Putin in Alaska last Friday.

However, these developments did not give markets a clear direction in the foreign exchange markets, while European stocks recorded slight gains. Sami Shaar, chief economist at Lombard Odier, said that the relatively low energy costs in Europe and its lack of exposure to developments in the war make it unlikely that these issues will be a major market driver.

Summer holidays in the northern hemisphere also contributed to lower liquidity levels, which was reflected in weak trading volumes.

On the macro level, investors are awaiting the outcome of the Jackson Hole symposium, during which Fed Chairman Jerome Powell will speak about economic prospects and the monetary policy framework. Although markets are pricing in with more than 80% probability a rate cut in September, according to the CME FedWatch tool, analysts expect Powell to avoid committing to a clear policy path before August data is released.

Shaar said: “The market expects signals confirming that the September cut is guaranteed, but I’m not sure that this is what will happen.”

According to analysts at DBS, Powell is likely to send a balanced message, “keeping the door open for a preventive rate cut to avoid further deterioration in the labor market, while at the same time warning against excessiveness or haste in the cuts.”

The Fed’s July meeting minutes are due on Wednesday, which may reveal insights into policymakers’ thinking regarding the rate path, although the meeting preceded a weak jobs report that led investors to price in the cut more strongly.

As for other currencies, the Hong Kong dollar was among the notable movers, rising 0.3% to 7.7944 against the US dollar as interbank interest rates climbed to the highest level in three months, within the narrow trading band allowed between 7.75 and 7.85.

Digital currencies, meanwhile, were dominated by declines, with Bitcoin falling 1.5% to mark a third straight day of losses after hitting a record high last week, while Ethereum dropped 2.7%.

The Australian and New Zealand dollars remained stable, while the Swedish krona rose 0.3% to 9.5360 against the US dollar.

Gold prices rose cautiously in the European market on Tuesday, stabilizing within a limited trading range above the lowest level in two weeks, supported by the current decline in US dollar levels in the foreign exchange market.

This cautious rise comes as investors refrain from building large buying positions, while awaiting the launch of the annual Jackson Hole Economic Symposium, where a number of major central bank governors are scheduled to speak, led by Federal Reserve Chairman Jerome Powell.

Price Overview

• Gold prices today: Gold rose by about 0.3% to ($3,341.87), from the opening level of ($3,332.57), recording a low of ($3,326.18).

• At Monday’s settlement, gold lost 0.1% and recorded the lowest level in two weeks at $3,323.64 per ounce, pressured by the rise in the US dollar and Treasury yields.

US Dollar

The dollar index fell on Tuesday by more than 0.1%, reflecting a renewed decline in the US currency against a basket of major and minor counterparts, which favors higher prices of gold and other dollar-denominated metals.

US Interest Rates

• According to the CME FedWatch Tool: Market pricing for a 25 basis point rate cut in September is currently steady at 84%, while the probability of rates remaining unchanged is at 16%.

• Market pricing for a 25 basis point rate cut in October is currently steady at 92%, with only 8% for no change.

• To reassess these expectations, markets await Fed Chair Jerome Powell’s speech on Friday at the Jackson Hole Symposium.

Gold Outlook

• Capital.com market analyst Kyle Rodda said: “Gold remains stable and is eagerly awaiting a new catalyst for an upward move. I think the most important event to watch is Jackson Hole and whether the Fed will provide cautious guidance.”

• Rodda added: “If a peace deal is reached between Ukraine and Russia—which is unlikely—that would be a very negative surprise for gold prices.”

SPDR Fund

Gold holdings at the SPDR Gold Trust, the world’s largest gold-backed ETF, remained unchanged on Monday, with the total at 965.37 metric tons, the highest level since September 9, 2022.

The euro declined in the European market on Tuesday against a basket of global currencies, to extend its losses for the second consecutive day against the US dollar, under negative pressure from the rise in US Treasury yields, which supports the rise of US currency levels in the foreign exchange market.

The likelihood of a European interest rate cut in September declined, due to the entrenched inflationary pressures currently facing monetary policymakers at the European Central Bank, and in order to reprice those expectations, investors later this week await comments from ECB President Christine Lagarde at the annual Jackson Hole Economic Symposium.

Price Overview

• Today’s euro exchange rate: The euro fell against the dollar by 0.2% to ($1.1639), from the opening price of ($1.1661), and recorded the highest level at ($1.1675).

• The euro ended Monday’s trading down by 0.35% against the dollar, marking its second daily loss in the last three days, due to the decline in expectations of a US interest rate cut.

US Dollar

The dollar index rose on Tuesday by 0.2%, maintaining its gains for the second consecutive session, reflecting the continued rise of the US currency levels against a basket of major and minor currencies.

This rise is supported by the current increase in the yield on 10-year US Treasury bonds, as strong data on producer prices and retail sales in the United States reduced the likelihood of a Federal Reserve interest rate cut in September.

In order to reprice those expectations, markets this week are awaiting comments from Federal Reserve Chairman Jerome Powell at the annual Jackson Hole Economic Symposium.

European Interest Rates

• The latest inflation data in the euro area showed the persistence of entrenched inflationary pressures on the European Central Bank’s monetary policymakers.

• According to some Reuters sources, a clear majority at the ECB’s latest meeting expressed a preference to keep interest rates unchanged in September, for the second consecutive meeting.

• The money market’s pricing of the likelihood that the European Central Bank will cut European interest rates by about 25 basis points in September is currently stable below 30%.

• And in order to reprice those expectations, investors are awaiting comments from European Central Bank President Christine Lagarde at the Jackson Hole Symposium.

The Japanese yen declined in Asian markets on Tuesday against a basket of major and minor currencies, deepening its losses for the second consecutive day against the US dollar, hitting a two-week low amid the continued rise in US 10-year Treasury yields.

With current weak expectations for the Bank of Japan to raise interest rates by 25 basis points in September, the market is awaiting further evidence on the path of Japanese monetary policy normalization during the remainder of the year.

Price Overview

• USD/JPY today: the dollar rose about 0.2% against the yen to ¥148.12, the highest in a week, from the opening level of ¥147.86, after hitting a low of ¥147.62.

• The yen ended Monday’s session down 0.5% against the dollar, its biggest daily loss since July 31, amid recent developments in the US bond market.

US Treasury Yields

The 10-year US Treasury yield rose by about 0.25% on Tuesday, extending gains for the fourth consecutive session, nearing a three-week high at 4.353%, which supports further investment in the US dollar.

These developments in the bond market came after strong US producer price and retail sales data, reducing the likelihood of a Federal Reserve interest rate cut in September.

To reassess these expectations, markets this week are awaiting remarks by Federal Reserve Chairman Jerome Powell at the annual Jackson Hole Economic Symposium.

Japanese Interest Rates

• Current pricing of the probability for the Bank of Japan to raise rates by 25 basis points at the September meeting stands around 40%.

• To reprice these odds, investors await more data on inflation, unemployment, and wage levels in Japan.

• Bank of Japan Governor Kazuo Ueda is scheduled to speak at the Jackson Hole Symposium, and his remarks are expected to provide further evidence on the course of Japan’s monetary policy normalization this year.