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Euro Exchange Rate forecast to weaken as Russia/Ukraine standoff intensifies

The Euro weakened against the majority of its major peers on Tuesday in a quiet session as investors remain jittery over the ongoing standoff between the West and Russia.

Indexes of currency volatility fell to their lowest levels in 15-months as western nations threatened to enact repercussions against the Russians for their occupation of the Crimea Peninsula. The sanction along with the Ukrainian prime ministers meeting with US President Barack Obama is likely to intensify tensions.

The Euro was also weakened by comments made by European Central Bank Vice-President Vitor Constancio who said that the markets hadn’t understood policy makers words after last week’s ECB policy meeting.

“It seems that some ECB policy makers are looking to manage the market reaction a little bit in the aftermath of the meeting. It at least didn’t give it another reason to continue rising,” said a forex strategist at BNP Paribas.

Constancio was quoted as saying; “Another element in the statement of the president that was not picked up by analysts and the markets. The statement that indeed our forward guidance regarding stable or lower rates is seen as guidance that goes beyond a simple improvement in the situation.”

After last week’s ECB policy statement the Euro surged against its peers and managed to hit its best level in over two years against the US Dollar. Now that Constancio has said that once again the markets misunderstood the message made by policy makers the Euro is likely to pare the gains it made.

The single currency could see movement on Thursday if inflation reports out of Italy and Ireland come in improved. Retail sales data out of Spain will also affect the currency’s strength.