The dollar edged higher on Monday as confirmation was awaited that there will be talks this week between China and the United States, which markets hope will lead to an easing of their trade disputes. The dollar index against a basket of six major currencies ticked up 0.11 percent in early trading today after shedding more than half a percent on Friday. Escalating trade tensions between the United States and its trading partners, in addition to a plunge in the Turkish lira, has taken a heavy toll on emerging market currencies. These strains had pushed the dollar index to its highest since June 2017.
Minutes of the Federal Reserve’s August policy meeting are due on Wednesday and should show policy makers are upbeat on the economy and committed to further gradual rate hikes. Federal Reserve Chair Jerome Powell and other central bankers meet at Jackson Hole, Wyoming, from Friday to discuss the root causes of stubbornly low inflation, slow wage growth and lethargic productivity gains. The prospect of yet higher U.S. rates had been underpinning the dollar, though the currency took a knock-on Friday as risk appetite improved just a little.
We have a quiet start to a data-light week ahead, with the Eurozone producer’s price index, (PPI), construction output and German Bundesbank monthly economic report, the only key macro news due on the cards. The economic data are expected to have limited impact across the fx space, as the Italian budget concerns and Brexit uncertainty will continue to drive the sentiment in Europe. And ahead this week; from Thursday to Saturday, three-day, Jackson Hole Symposium of Central Bankers that is expected to strengthen EUR, AUD, CAD and weaken JPY and USD.