Euro US Dollar Exchange Rate Drops amid Ukraine Crisis
The Euro US Dollar (EUR/USD) exchange rate is down today as geopolitical anxiety steers a risk-off market sentiment.
At the time of writing, the EUR/USD exchange rate is trading at around $1.0988, roughly down 0.5% from today’s opening levels.
Euro (EUR) Falls as Russian Atrocities Threaten Peace Process
The Euro (EUR) is slipping against the US Dollar (USD) today amidst fresh doubt over Ukraine-Russia peace talks.
In areas where Moscow has pulled back its forces, including Bucha and Motyzhyn, Russian atrocities are coming to light.
Although Russian Foreign Minister Sergei Lavrov ‘categorically reject[s]’ all allegations, Volodymyr Zelensky has stated Russian troops have committed genocide after bodies were found near Kyiv.
Zelensky has suggested it will be harder for Ukraine to negotiate with Russia now it is more aware of the scale of the alleged atrocities carried out by Russian troops.
However, Zelensky has confirmed Ukraine will continue having peace talks with Russia in a bid to end the war through diplomacy ‘because Ukraine must have peace’.
Meanwhile, Western leaders have pledged to impose additional sanctions against Russia in response to the atrocities.
This is spooking EUR investors as they fear the sanctions could also be damaging for the Eurozone economy.
On the other hand, as the largest economy in the bloc, Germany’s trade balance for February is capping EUR losses.
German trade surplus printed at €11.4 billion, above both €3.2 billion in January and market forecasts of €7.1 billion.
However, it is significantly below the €17.9 billion surplus record in the same month the previous year.
Meanwhile, exports and imports rose by 6.4% and 4.5%, respectively. The majority of sales were in EU countries, though trade with non-EU countries increased to 2.1% – predominately with the US, China and the UK.
Trade with Russia drastically decreased, contracting by 7.3% in response Western-imposed sanctions.
US Dollar (USD) Enjoys Risk-Off Sentiment
The US Dollar (USD) is enjoying tailwinds from today’s risk-off market mood, gaining ground against the Euro (EUR).
As risk appetite collapses, USD investors are flocking to the safe haven currency.
Moreover, the ‘Greenback’ is also rising in tandem with US treasury yields strength today, amidst expectations for a series of aggressive interest rate hikes from the Federal Reserve this year.
This comes after the US economy witnessed an additional 431,000 nonfarm payrolls in March, further supporting rate hike bets.
At present, USD investors are pricing in 50 basis point rate hikes at the summer meetings which is bolstering demand for the ‘Greenback’.
Furthermore, the US factory orders for February printed in line with market expectations, reporting a 0.5% contraction, down from the previous 1.5%.
Euro US Dollar Forecast: The Ukraine Crisis to Hold onto Limelight
Looking ahead, the Russia-Ukraine war is likely to remain as the key driving force between the Euro US Dollar exchange rate.
Should relations between Russia and Ukraine sour further, it is likely to weigh on EUR exchange rates.
Into tomorrow, the ISM non-manufacturing PMI is expected to report an acceleration of growth in the US service sector last month, potentially buoying the US Dollar.
Meanwhile, the final reading for the Eurozone’s March services PMI is expected to drop from 55.5 to 54. If market forecasts are reached, it may place pressure on EUR.