Dollar stalled awaiting signals on trade and Fed policy

China on Monday accused the United States of harboring “extravagant expectations” for a trade deal, underlining the gulf between the two sides as U.S. action against Chinese technology giant Huawei began hitting the global tech sector. The dollar index, which measures the greenback against a basket of six currencies, was down 0.06%, little moved by the bickering.

Against the euro, the dollar was slightly weaker, last down 0.07%.

The dollar was also on hold ahead of Jerome Powell’s speech later Monday, which should offer insight into the Fed chair’s thinking about interest rates and the effects trade tensions may have on the U.S. economy. On Wednesday, the Federal Open Market Committee will release minutes from its last meeting, which investors hope will show what prompted the policymakers to strike a broadly neutral stance this month.

Powell’s speech on Monday “will be something we’re watching very closely to see if there are any comments from the Federal Reserve as to if they feel there will be a change in their outlook … because of the increased trade tensions,” and “what they will be doing going forward,” said Chuck Tomes, portfolio manager at Manulife Asset Management.

At its May 1 meeting, the Fed decided to keep interest rates steady and signaled little appetite to adjust them any time soon, taking note of strong job growth.

Since then, trade tensions between Washington and Beijing have escalated, casting a shadow on the outlook of global growth and fueling expectations the U.S. central bank will have to cut interest rates in the coming months.

Increased expectations of rate cuts so far have had little impact on the dollar, though it has found some strength from the escalating trade tensions as investors have turned to it as a safe haven. Still, positioning data suggested that strength may be temporary, as investors have trimmed some of their long positions in the U.S. currency against both its developed and emerging market rivals.

Market strategists note the implied yields on U.S. futures contracts are starting to price in a second rate cut this year as concerns have mounted.

“As such, these (Fed) minutes will take on added significance as markets try to figure out the Feds true message,” said Win Thin, global head of currency strategy at Brown Brothers Harriman in New York.