The main focus will likely be the FOMC meeting Minutes

Last week’s retreat in the US Dollar has partly reversed so far this week, as markets take a slightly less optimistic view on the Russia-Ukraine negotiations, while keeping one eye on additional tariffs from the Trump administration.

While there may be scope for a further improvement in risk appetite (and weakness in the dollar) in the event of a peace deal, we think that any move would be limited by:

a) The possibility that the deal leads to nothing more than a temporary pause in the war, and not a removal of long-term geopolitical risk.

b) The fact that the striking of an agreement already appears largely priced into the value of exchange rates.

The main focus during the rest of the week will likely be Wednesday's FOMC meeting minutes. We expect policymakers to flag a lack of confidence on inflation, while emphasising that additional Fed cuts will gradual. Friday’s PMI data from S&P will also be closely watched, with economists eying a mild pickup in business activity in February.