The Euro weakened against the Pound, US Dollar and other major peers on Thursday as the markets were spooked over news that Russian military forces have launched an invasion of Ukraine, a host of disappointing economic data releases also weighed.
Ukraine accused Russia of launching an invasion in the southeast of the country after Ukrainian forces were pushed back from the border town of Novoazovsk and advanced towards a strategically important coastal city.
Russia has denied that it is involved in the conflict despite a growing pile of evidence that suggests otherwise. Russian T-72 battle tanks were spotted crossing into the country.
On Wednesday, Ukraine’s National Defense and Security Council said that Russian forces were directing massive artillery fire over the border at Novoazovsk. Russian forces and pro-Russia rebels have seized villages around the town, the NSDC added.
U.S. Ambassador to Ukraine Geoffrey Pyatt said on Thursday that Russian soldiers were directly involved in the fighting, alongside the pro-Russia rebels.
“Russian supplied tanks, armoured vehicles, artillery and multiple rocket launchers have been insufficient to defeat Ukraine’s armed forces, so now an increasing number of Russian troops are intervening directly in the fighting on Ukrainian territory, Russia has also sent its newest air defence systems including the SA-22 into eastern Ukraine and is now directly involved in the fighting.”
Because of the worrying development, the Euro fell as demand for safer haven assets increased. Concerns that this latest escalation in the conflict could see the West impose harsher sanctions against Russia, a move that could add further damage to the Eurozone economy.
‘The Euro has been out performed by every currency this week following a string of disappointing economic data publications. The issues began at the tail end of last week after a speech given by European Central Bank President Mario Draghi at the Jackson Hole symposium. In the speech he intimated towards further stimulus and, since then, a quantitative easing rhetoric has dominated trader focus,’ said Ollie Carpenter at Future Currency Forecast.
Weaker than expected data releases out of Germany such as Thursdays worse than forecast unemployment data is being blamed on the negative effects of the Ukraine situation and the retaliatory sanctions introduced by Russia against European nations.
The Euro was also weakened by data, which showed that economic sentiment across the Eurozone is at its lowest level in eight-months as the regions consumers grow less confident over their economic prospects.
‘Sentiment dropped significantly in Italy (-4.1), sending the ESI below its long-term average of 100, and in Germany (-1.9). Milder contractions were booked also in France (-0.6) and the Netherlands (-0.8), while sentiment remained flat in Spain’ said the European Commission in regards to the data releases.
The Euro is forecast to end the week on a low against the Pound and US Dollar as the grim news out of Ukraine is likely to increase concerns over the Ukraine crisis, and as Friday’s Gross Domestic Product data is likely to disappoint. Retail sales too are also expected to come in weaker.
Euro Exchange Rates
[table width=”100%” colwidth=”50|50|50|50|50″ colalign=”left|left|left|left|left”]
Currency, ,Currency,Rate ,
Euro,,US Dollar,1.3174 ,
Euro,,British Pound,0.7986 ,
Euro,,Australian Dollar,1.4207 ,
Euro,,Canadian Dollar,1.4482 ,