US dollar gains after Trump-Zelensky talks

Today’s headlines

What’s happening: The US dollar moved higher on Monday as investors assessed the latest geopolitical developments.

What happened: US President Donald Trump met with Ukraine’s President Volodymyr Zelensky and European leaders to discuss ending the ongoing war with Russia.

Investors also lowered speculations of an interest rate cut by the Federal Reserve next month before Chairman Jerome Powell’s speech on Friday.

Why it matters: Donald Trump had met with Russian President Vladimir Putin on Friday, during which he had said he would press Zelensky to reach a settlement quickly.

Trump met with Zelensky at the White House on Monday and expressed optimism over ending the war with Russia. He also announced plans to call Putin after the talks and said the Russian President also wants to end the war.

Investors had been looking forward to the Fed announcing a rate cut in September. Comments from officials have dampened these expectations and markets are now pricing in policymakers to keep rates unchanged.

Data released on Monday showed a gauge of US homebuilder sentiment had declined in August, to its weakest level in over two-and-a-half years. The NAHB/Wells Fargo Housing Market Index tumbled to 32 in August, compared to a reading of 33 in the previous month. The figure also missed market projections of 34.

The US dollar index, which measures the greenback’s performance versus a basket of major peers, rose to 98.17 on Monday. The EUR/USD forex pair fell around 0.3% to 1.1662, while the GBP/USD declined around 0.4% to 1.3504.

What to watch: Investors will focus on Powell’s appearance at the Fed’s annual economic policy symposium in Jackson Hole, Wyoming later this week, to get further insights on upcoming rate cut decisions.

Data on building permits (1630 UAE Time) and housing starts (1630 UAE Time) will be released today. Building permits in the US, which fell by 0.1% to an annualised rate of 1.393 million in June, are expected to decline by 0.2% in July. Analysts expect housing starts to decline by 2.2% in July, following a 4.6% gain in June.

The markets today

European stocks in focus today ahead of current account data

Context: Equity markets in the Europe closed on a mixed note on Monday as investors assessed corporate updates and a meeting between Trump and European leaders.

Details: The US President met with Ukraine’s President and European leaders on Monday, and said he was looking to arrange a direct meeting between Putin and Zelensky.

The STOXX Europe 600 Index gained 0.08% to close at 554.01 on Monday. London’s FTSE 100 added 0.21% to reach 9,157.74, while Germany’s DAX 40 and France’s CAC 40 lost 0.18% and 0.50%, respectively.

Healthcare stocks were among the top gainers, rising around 1.4% on Monday, following a 6.6% surge in shares of Novo Nordisk. Shares of the pharmaceutical giant jumped after its weight-loss drug Wegovy received regulatory approval in the US for the treatment of a serious liver disease.

Bank stocks fell, with shares of BNP Paribas and Nordea each declining more than 1% on Monday.

Shares of Vestas jumped 15% during the session following favourable new rules in the US tax credit system for clean energy projects.

What to watch: Investors await the release of data on Eurozone’s current account (1200 UAE Time) today. The Eurozone’s current account surplus, which contracted to €1 billion in May from €7.3 billion in the year-ago period, is expected to widen sharply to €30.0 billion in June.

Markets will also continue monitoring tariff-related announcements and talks between the US and Russia.

Other Markets: US trading indices closed mixed on Monday, with the Dow Jones index and S&P 500 down by 0.08% and 0.01%, respectively, and the Nasdaq 100 up by 0.007%.

The news shaping the markets

France’s President Emmanuel Macron warned of further sanctions on Russia if peace talks fail. The news sent the RUB/USD pair lower in forex trading this morning.

Australia’s Westpac-Melbourne Institute Consumer Sentiment Index rose 5.7% to 98.5 in August, lending support to the AUD/USD forex pair.

New Zealand’s producer input prices rose by 0.6% in the second quarter, following 2.9% growth in the previous quarter, which sent the NZD/USD pair higher in forex trading this morning.

Chile’s current account deficit widened to $3.25 billion in the second quarter, from $1.86 billion in the year-ago period. This being the largest current account gap in almost two years exerted pressure on the CLP/USD forex pair.

Brazil’s IBC-Br Economic Activity Index declined 0.1% in June. This being the second consecutive month of a decline sent the BRL/USD pair lower in forex trading this morning.

What else to watch today

UK’s Index-linked Treasury Gilt 2035 auction (1300 UAE Time), Germany’s 5-year Bobl auction (1330 UAE Time), Canada’s inflation rate (1630 UAE Time), as well as US Redbook index (1655 UAE Time).