Markets Lean Risk-On as Dollar Softens.

  • Dollar under mild pressure as risk assets stay well bid, energy prices ease, and Fed cuts remain priced.

  • Markets shrugged off Trump–Putin summit “failure,” focusing instead on possible US–Russia security concessions.

  • Euro supported by falling energy costs and benign conditions, with scope to test higher if Powell sounds dovish.

  • Sterling underpinned by a more hawkish BoE outlook versus the Fed’s dovish tilt; GBP/USD could extend higher.

  • Key events: FOMC minutes (Wed), Lagarde’s speech (Wed), flash PMIs (Thu), Powell at Jackson Hole (Fri), Fitch UK review (Fri).

USD: Benign backdrop keeps pressure on the dollar
Western media quickly framed Friday’s Trump–Putin summit as a failure, citing a lack of progress on a ceasefire and the re-emergence of sanction talk. Markets, however, appear unfazed. EUR/CHF is holding its gains, CEE currencies are well supported, and oil and gas prices remain under pressure. Equities are steady, with Asia leading the positive tone carried through to Europe and US futures.

The standout takeaway was a comment from US envoy Steve Witkoff that Russia might accept a NATO-style US security guarantee for Ukraine – a point central to peace talks. Should this gain traction, it could be well received by investors, even if territorial disputes remain unresolved.

All this comes against a benign global backdrop. Markets are pricing two to three Fed cuts this year, leaving risk appetite buoyant. Volatility is subdued, spreads are tight, and emerging markets are in demand. Chinese equities, meanwhile, continue to climb to decade highs, reflecting optimism that policy support will outweigh trade headwinds.

This is dollar-negative, and we expect the greenback to stay offered. The calendar is light but Fed policy will dominate. The July FOMC minutes are due Wednesday, and Powell’s Jackson Hole speech on Friday will be the highlight. While he may stop short of confirming September easing, shifting labour market data will be difficult to ignore. With risk assets well supported and energy soft, DXY could trade lower, with a break below 97.00/97.10 possible into Friday.

EUR: Supportive conditions keep euro bid
European currencies are consolidating recent gains. The drop in oil and gas prices is particularly helpful, given how the 2022 energy shock sent EUR/USD below parity. Barring a sharp reversal in Ukraine talks or energy markets, benign conditions should keep the euro supported.

Data this week includes Thursday’s flash PMIs and tomorrow’s balance of payments release – important for gauging foreign demand for eurozone assets. Lagarde speaks Wednesday, but with markets only pricing one further cut over the next year, she is unlikely to shift expectations.

EUR/USD looks steady within 1.1650–1.1750 but could test 1.1830 should Powell deliver a dovish tone on Friday.

GBP: BoE hawkishness underpins sterling
EUR/GBP is settling at the lower end of 0.8600–0.8700, reflecting the Bank of England’s more credible hawkish stance. Markets now price just 50bp of easing ahead, far less than the 125bp expected from the Fed. With inflation still sticky, the BoE outlook is unlikely to shift near-term.

This backdrop supports GBP/USD, with potential to push through 1.3585/3600 and target 1.3680/3700 into week’s end. One risk event to watch: Fitch’s sovereign rating review for the UK on Friday evening.

*All rates shown are indicative of interbank rates and should only be used for indication purposes only. It is important to note that foreign exchange rates fluctuate and that rates may vary depending on the amount and the base currency that is purchased or sold. Rates are correct as of 8:00am UK time. CentralFX are not responsible for the rates shown.