The US dollar retreated Monday, and the euro rose, after European leaders took the lead in pushing for a peace deal between Ukraine and Russia.
At 04:00 ET (09:00 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.3% lower to 107.245, after gaining around 0.7% last week.
Dollar retreats from highs
The dollar is falling back from the elevated levels seen after U.S. President Donald Trump and Ukrainian President Volodymyr Zelenskiy clashed at the end of last week in an extraordinary meeting at the Oval Office.
Zelenskiy has since received a warm welcome in Britain, with U.K. Prime Minister Keir Starmer stating on Sunday that European leaders had agreed to draw up a peace plan to present to Washington.
The dollar has also retreated after U.S. Commerce Secretary Howard Lutnick suggested tariffs on Canada and Mexico, set to take effect on Tuesday, may not be the full 25%.
“Canadian and Mexican officials are attempting to strike another last-minute deal, and US officials have also floated the idea of imposing smaller than 25% tariffs,” said analysis at ING, in a note.
“One possibility is that – alongside increased commitment to fighting illegal drug traffic – Trump will require both countries to replicate US tariffs on China, which may be hiked from 10% to 20%.”
Euro rebounds on peace hopes
In Europe, EUR/USD traded 0.2% higher to 1.0394, rebounding from a 2-1/2-week low, supported by optimism around potential peace talks between Ukraine and Russia.
“We still think exposed currencies (EUR, Scandies) are due a rally if and when a peace deal is agreed,” said ING, but increased confrontation from the U.S. towards Europe and Ukraine might reduce the security guarantees for Kyiv and ultimately leave some residual geopolitical risk in asset prices.
Inflation data, due later in today’s session, from the eurozone could offer up more clues over future interest rate decisions by the European Central Bank, especially after data released at the end of last week showed price growth slowing in some of the bloc’s largest economies.
The ECB meets on Thursday, and is widely expected to cut interest rates again, reducing its key rate by another 25 basis points to 2.50%, in order to stimulate an economy that has been stagnant for nearly two years.
GBP/USD rose 0.1% to 1.2590, helped by the indications that European leaders would take the lead in the Ukrainian peace talks.
“UK data calendar is quiet this week, and the pound will primarily be driven by external input. The major domestic event is probably the Treasury Committee questioning of Bank of England Governor Andrew Bailey and other MPC members on Wednesday,” ING said.
“The February BoE cut was accompanied by a dovish vote split, but data has since pointed to more caution on easing. Fourth-quarter growth, December wages and January CPI all came in stronger than expected, and the risks are that we could see some hawkish adjustment in Bailey’s stance.”
Yen gains after PMI data
In Asia, USD/JPY dropped 0.4% to 150.13, with the Japanese currency helped by the release of a stronger-than-expected manufacturing PMI print, although the reading still remained in contraction.
USD/CNY traded 0.1% higher to 7.2925, despite Chinese manufacturing and non-manufacturing activity growing more than expected in February, government and private PMI data showed.
The prints showed some resilience in the Chinese economy, especially after a string of stimulus measures through late-2024.
But investors were waiting to gauge the impact of higher trade tariffs on China, with Trump having done little to soften his rhetoric against Beijing.
