By Saikat Chatterjee
LONDON (Reuters) – The dollar gave up all its earlier gains on Tuesday, as markets saw few concrete measures emerging from the U.S.-North Korea summit and waited for guidance from two of the world’s top central banks this week.
With most currencies staying within well-trodden trading ranges before U.S. inflation data due shortly, the Norwegian kroner was the surprise winner in the London session as a survey by Norway’s central bank painted a rosy outlook for the economy.
“There is very little to take away from the summit and the markets will be focused on the Fed’s forward guidance,” said Manuel Oliveri, an FX strategist at Credit Agricole (PA:CAGR) in London.
U.S. inflation data for May is expected to show a modest rise in price pressures, with the headline rate tipped to rise to 2.7 percent on an annual basis, according to a Reuters poll, versus 2.5 percent previously. The data is due at 1230 GMT.
Against a basket of rivals (DXY), the dollar was flat on the day at 93.60 after bouncing 0.3 percent to 93.89 in early trading in Asia, its highest since June 5.
U.S. President Donald Trump said he had formed a “very special bond” with North Korean leader Kim Jong Un at a meeting, but the Korean stock and currency markets were broadly flat and U.S. debt, which tends to benefit from geopolitical uncertainty, held steady.
“This is more of a side show and headline grabber rather than yielding anything substantive with markets more worried about the developments at the G7 summit,” said Viraj Patel, a currency strategist at ING in London, referring to trade tensions among the world’s largest economies.
Against the Japanese yen , the dollar was trading a quarter of a percent higher at 110.32 yen, its highest in nearly three weeks and above a 200-day moving average.
The Norwegian crown jumped after a central bank survey indicated Norwegian companies are expecting the pace of output growth to accelerate in the next half year, painting a relatively robust outlook for the domestic economy.
Norges Bank’s regional network business survey, a key component in rate decisions and interest rate forecasts is followed by a central bank meeting next week.
The crown (EURNOK=D3) strengthened against the euro to a seven-month high of 9.4272, up 0.4 percent on the day.
Currency markets had a slightly more risk-on mode with perceived safe-haven currencies such as the Japanese yen and the Swiss franc weaker on the day, while relatively high yielding currencies such as the Australian dollar posting modest gains.
Of more importance to global markets will be any clarity on the outlook for U.S. and European monetary policy this week at a time when policymakers have stuck to optimistic stances despite the tensions over global trade.
The U.S. Federal Reserve holds a two-day meeting starting on June 12, and it is widely expected to raise interest rates for the second time this year. The focus is on whether the central bank will hint at raising rates a total of four times in 2018.
The European Central Bank also meets on June 14, when it could signal intentions to start unwinding its massive bond purchasing program.
Against the dollar, the euro was flat on the day at $1.1784 (EUR=EBS).