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Euro US Dollar Exchange Rate Soars amid Return of Risk-On Trading

Euro and US Dollar banknotes

Euro/US Dollar (EUR/USD) Exchange Rate Jumps amid Increased Risk Appetite

The Euro US Dollar (EUR/USD) exchange rate is continuing to climb today. A gradual return of risk appetite has likely helped to bolster the Euro despite the Russia-Ukraine conflict. An uptick to German bond yields today may also have underpinned losses for the single currency.

At time of writing the EUR/USD exchange rate is at around €1.9074, which is up roughly 0.7% from this morning’s opening figures.

Euro (EUR) Jumps amid Russia-Ukraine Ceasefire

The Euro (EUR) is continuing to recover lost ground against its rivals today. A gradual recovery in risk appetite has helped the single currency to regain some of its losses however. The Russia-Ukraine conflict had been weighing on the currency and is likely to continue to limit gains.

The agreement of a temporary ceasefire between the two sides is likely helping to bolster the Euro today. The two sides have agreed upon six ‘humanitarian corridors’ to allow civilians to evacuate from key cities.

The situation has become dire for many Ukrainians left in besieged cities, with the situation in the port city of Mariupol described as ‘apocalyptic’ by the Red Cross.

Speculation over the European Central Bank’s (ECB) interest rate decision on Thursday may also be helping to underpin losses for the single currency today. Analysts are expecting the ECB to delay a rate hike until late 2022 given current uncertainty in the markets.

Concerns over energy supplies for Europe may limit gains for the Euro however. In a televised statement on Tuesday, Russian deputy prime minister Alexander Novak warned that ‘an embargo on gas pumping’ could be imposed.

The threats have led the European Commissions to draft plans to diversify Europe’s fossil fuel supplies and speed up the transition to renewable energy sources.

US Dollar (USD) Drops as Turkey Announces Diplomatic Talks

The US Dollar (USD) is seeing a sharp pullback from highs earlier this week amid a return of risk-on trading. Renewed hopes for a peaceful end to the Russia-Ukraine conflict has likely dented confidence in USD.

Russian Foreign Minister Sergey Lavrov is set to travel to Turkey on Thursday to meet with his Ukrainian counterpart Dmytro Kuleba. The talks, announced by Turkish officials. are the first major meeting between ministers since Russian troops crossed the Ukrainian border.

Losses for the US Dollar may be underpinned today by the possibility of fresh tensions between Russia and the West. Both the UK & US announced yesterday that they would be banning the import of Russian oil.

The move increased concerns of inflationary pressures and a poor global economic outlook. This could in turn drive investors back to the US Dollar.

EUR/USD Exchange Rate Forecast: Will ECB Signal a 2022 Rate Hike?

Looking to the week ahead for the Euro, investors will be most keenly awaiting the ECB’s interest rate decision on Thursday. A rate hike announcement by the ECB is considered highly unlikely. Any signals that a hike may come later in 2022 could push EUR higher.

On Friday, should finalised German inflation figures confirm forecasts then the Euro could climb higher. The figures could also increase pressure on the ECB to hike rates this year.

The US Dollar could also be pushed higher by inflation figures this week. Thursday will bring fresh inflation data for February which is forecast to rocket to fresh highs. This could in turn bolster USD and increase pressure on the Federal Reserve to raise rates at their March meeting.

A drop to US consumer sentiment for March could limit gains for USD should the figures print as forecast on Friday.