Geopolitical Optimism and Economic Data Shape USD, EUR, and GBP Movements.

• USD: USD softens as peace talk optimism and slowing U.S. data fuel speculation of a dovish Fed stance.
• EUR: EUR rises on Russia-Ukraine peace hopes and USD weakness, with inflation data set to guide ECB policy.
• GBP: GBP nears two-month high on Russia-Ukraine peace hopes and upbeat UK data, with inflation figures key for BoE outlook.

U.S. Dollar: The U.S. dollar is trading lower at the start of the week as investors weigh ongoing geopolitical developments and upcoming economic data. Market sentiment has shifted amid optimism surrounding potential peace talks between the U.S., Russia, and Ukraine, which could ease global tensions and reduce demand for the greenback as a safe-haven asset. Additionally, traders are closely watching the release of the ISM Manufacturing PMI data later today, which is expected to provide further insight into the health of the U.S. economy. Recent economic reports have pointed to a slowdown in consumer spending, fuelling speculation that the Federal Reserve may adopt a more dovish stance on interest rates later this year.

Euro: The Euro is trading higher as diplomatic efforts to mediate the Russia-Ukraine conflict improve market sentiment across Europe. Reports that European leaders are set to present a peace plan to Washington this week have lifted the single currency, with hopes that a ceasefire agreement could ease energy supply concerns across the Eurozone. The euro’s strength is also supported by the weaker U.S. dollar, as investors anticipate a potential shift in the Federal Reserve’s monetary policy later this year. However, gains may be limited as markets await key Eurozone inflation data later this week, which could influence the European Central Bank’s next policy steps. Analysts expect inflation to remain elevated, adding pressure on the ECB to maintain a cautious approach to rate cuts in the months ahead.

GBP: The British Pound is trading near a two-month high, as renewed optimism surrounding geopolitical developments and positive economic data support the currency. Sterling has benefited from hopes of a potential Russia-Ukraine peace deal, with diplomatic talks set to take place in Saudi Arabia this week. Improved market sentiment has boosted risk appetite, supporting the pound against the U.S. dollar. On the domestic front, stronger-than-expected UK GDP data from the previous quarter and expectations of higher inflation figures due later this week have fuelled speculation that the Bank of England (BoE) may delay any potential rate cuts. Investors are watching Wednesday’s inflation data closely, with any upside surprise likely to strengthen the case for a more cautious BoE policy stance.

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