Euro US Dollar (EUR/USD) Exchange Rate Trends Higher as Russia Calls for Talks
The Euro US Dollar (EUR/USD) exchange rate climbed higher today. A mild return of risk appetite likely helped boost the currency pair as Russia signalled it was ready to engage with Ukraine in talks.
At time of writing the EUR/USD exchange rate is at around €1.1222, roughly 0.3% up from this morning’s opening figures.
US Dollar (USD) Dips as Russia Signals it is Ready for Talks
The US Dollar (USD) dipped against its rivals today. Significant losses for USD against its safer rivals were likely limited however by higher than expected rise to the PCE price index.
The Russian invasion of Ukraine dictated the market mood this week and heavily influenced USD’s fortunes today. Russia’s announcement on Friday that it is ready to begin talks with Ukraine in Minsk has seen a slight recovery to risk appetite. This likely limited gains for the US Dollar.
On the other hand, reports that Russian troops have closed in on the Ukrainian capital of Kyiv will likely support the demand for safe-haven assets. Calls from UK Prime Minister to remove Russia from the SWIFT payment system also likely helped prop up the US Dollar.
Further evidence of rising US inflation may have also helped boost USD today. The PCE price index, preferred measure of inflation for the Federal Reserve, rose to 6.1% above forecasts of 5.9%. The figures are likely to increase calls for an interest rate hike from the Fed.
Euro (EUR) Climbs as EU Set to Announce Further Russian Sanctions
The Euro (EUR) rose against its safer rivals today. The Russian invasion of Ukraine has weighed heavily on the single currency however, limiting its gains against riskier currencies. A dip in German bond yields may have also caused EUR to dip.
EUR could be bolstered after reports indicated that the EU is planning a series of harsh sanctions against Russia. Ministers are planning to approve a number of measures that include freezing the assets of Russian president Vladimir Putin.
This third round of sanctions comes amid news that Russian forces have captured the Hostomel airport to the West of Kyiv.
The single currency may also see limited gains following comments from European Central Bank (ECB) chief economist Philip Lane. Lane told policymakers on Friday that the Russian invasion of Ukraine could reduce the Eurozone’s economic output by as much as -0.4%.
Analysts took these figures with a pinch of salt however, with one source describing them as ‘back-of-the-envelope’ calculations.
EUR/USD Exchange Rate Forecast: Will Eurozone Inflation Increase Bets of ECB Rate Hike?
Looking to the week ahead for the Euro, a forecast downturn in the Eurozone’s February manufacturing activity on Tuesday could see EUR dip. An expected uptick to German inflation figures could help limit the single currency’s losses however. It’s likely investors will see higher inflation as further cause for a rate hike from the ECB.
This sentiment could be further fuelled should Eurozone inflation figures rise as forecast on Wednesday. A predicted unchanged unemployment rate for the Eurozone could further increase these bets, and push the Euro higher.
For the US Dollar, employment change figures for February on Wednesday are expected to rise significantly. This could push USD higher.
Testimonies from Fed Chair Jerome Powell on Wednesday and Thursday may help USD to make gains should Powell give any hawkish hints of the Fed’s future policy.
February’s non farm payrolls and unemployment rate are both expected to drop on Friday. This could increase speculation of a tightening labour market and help the US Dollar climb.