By Karen Brettell
NEW YORK (Reuters) -The dollar gained on Monday as U.S. President Donald Trump hosted 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 met with Ukrainian President Volodymyr Zelenskiy on Monday before holding talks with the leaders of Britain, Germany, France, Italy, Finland, the European Union and NATO.
Trump said that the United States would “help out” Europe in providing security for Ukraine as part of any deal to end the war in Ukraine and expressed hope that Monday’s summit could eventually lead to a trilateral meeting with Russian President Vladimir Putin, adding that he believes Putin wants the war to end.
Traders are also focused on Powell’s appearance later this week at the U.S. 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 83% 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.
A gauge of U.S. homebuilder sentiment fell unexpectedly in August, slipping back to its lowest level in more than two-and-a-half years, data on Monday showed.
The euro was last down 0.31% on the day at $1.1661. Against the Japanese yen, the dollar strengthened 0.41% to 147.79.
Citigroup said on Monday that its U.S. dollar positioning indicator has moved from showing a small short to zero, “pointing to no notable current net investor positioning in the currency.”
“Conflicting leveraged and real money USD positions have led to unusually low conviction levels this August. At face value this is consistent with low realized and declining implied FX volatilities in a market that has seen no clear USD direction for nearly two months,” Citi analyst Kristjan Kasikov said in a report.
Sterling weakened 0.35% to $1.3504.
In cryptocurrencies, bitcoin fell 0.95% to $116,598.
(Reporting by Karen Brettell in New York, Additional reporting by Jaspreet Kalra in Mumbai, Editing by Toby Chopra, Timothy Heritage and Matthew Lewis)
