This follows US President Donald Trump’s comments that there would be “major” additional sanctions against Iran in an attempt to prevent Tehran from developing nuclear capacities. Hopes are also rising that there could be an imminent breakthrough in the US-China trade war. Mr Trump and Chinese President Xi Jinping are due to meet at the G20 summit in Osaka later this week, leaving many US dollar traders bracing for a possible compromise between the two superpowers. Chinese Vice Minister of Commerce, Wang Shouwen, said: “We should meet each other halfway, which means that both sides will need to compromise and make concessions, and not just one side.”
US dollar traders are also looking out for today’s Chicago Fed National Activity Index figures for May.
These will be followed by the Dallas Fed Manufacturing gauge, which is expected to improve from -5.3 to -1.0, possibly providing some uplift for the US dollar.
There are no UK economic data releases today, with traders instead focusing on ongoing Tory leadership developments.
Jeremy Hunt, the Foreign Secretary, is putting pressure on Boris Johnson, saying that his rival “needs to show he can answer difficult questions.”
Brexit is also in the spotlight, with Mr Hunt challenging Mr Johnson on whether he would call a general election should MPs refuse to allow the UK to leave the EU without a deal on the 31 October.
Health Secretary Matt Hancock, meanwhile, showed support for Mr Johnson.
He said: “He’s got the energy, he’s got the support from right across the party, and I think that’s why he’s the right man for the job.”
Sterling traders are cautious, however, as Brexit uncertainty has increased due to the Conservative’s leadership competition.
The pound US dollar exchange rate will remain sensitive to political developments, with the spotlight being on the G20 US-China trade discussions this week.