Euro US Dollar Exchange Rate Drops as Ukraine Rejects Russia’s Demands
The Euro US Dollar (EUR/USD) exchange rate is down today, amid fresh geopolitical uncertainty.
At the time of writing, the EUR/USD exchange rate is trading at around $1.1030, down roughly 0.2% from today’s opening levels.
Euro (EUR) Slips as Ukraine Crisis Intensifies Once Again
The Euro (EUR) is down against the US Dollar (USD) today as markets are spooked by the apparent escalation of the conflict in Ukraine.
Ukraine has missed Russia’s deadline to surrender Mariupol. Since, Captain Svyatoslav Palamar of the National Guard Azov Regiment in Mariupol has reportedly announced bombs are ‘falling every ten minutes.’
This is weakening EUR exchange rates as it places more pressure on the EU to invoke further sanctions against Russia. With officials reportedly mulling a potential ban on Russian oil imports.
Irish Foreign Minister Simon Coveney said:
‘Looking at the extent of the destruction in Ukraine right now, it’s very hard to make the case that we shouldn’t be moving in on the energy sector, particularly oil and coal.’
The energy sector is Russia’s largest revenue steam and Ukraine has urged the EU to stop funding Russia’s war through its oil and gas imports.
However, it is not yet known what the economic fallout may be should the EU go forth with these sanctions, further weighing on the single currency.
On the other hand, Volomydyr Zelenskiey has stated that he is ‘ready for negotiations’ with Vladimir Putin.
Although peace talks have failed to make much progress thus far, it is hoped that a diplomatic solution may be reached should both leaders come together at the negotiating table.
Adding to the Euro’s weakness is Germany’s disappointing PPI print: the figures published at 1.4%, down from January’s 2.2% and missing expectations for a more modest drop to 1.7%.
US Dollar (USD) Climbs Following Hawkish Signals from Fed
The US Dollar (USD) is rising against the Euro (EUR) today after Federal Reserve policymakers’ delivered a broadly hawkish tone, boosting the ‘Greenback’.
The Fed hiked interest rates last week for the first time in three years, raising rates from 0.25% to 0.5% as expected.
Following this announcement, several policymakers stated that the Fed should be taking additional aggressive steps to tame US inflation.
Policymaker, Neel Kashkari, believes the Fed may need ‘to act more aggressively and bring policy to a contractionary stance in order to move the economy back to an equilibrium consistent with our 2% inflation target.’
Furthermore, geopolitical uncertainty is driving investors towards the safe haven currency.
Following a phone call between Joe Biden and Xi Jinping, Chinese authorities have stated that although they wish for the Ukraine crisis to be de-escalated, they won’t condemn Putin’s attacks.
Beijing claims the relationship between China and Russia is an ‘asset’ and to expect the Chinese authorities to jeopardise their links would be ‘naïve’.
Biden has previously stated he would impose sanctions onto China if they aid Russia. Should Biden goes forth with these sanctions, it will no doubt stoke market jitters.
Euro US Dollar Forecast: Ukraine Crisis to Remain in Limelight
Looking ahead, the Ukraine crisis is likely to continue driving volatility into the currency market, weighing on the Euro US Dollar exchange rate.
Later today and throughout tomorrow, both the Euro and US Dollar may be impacted by speeches from central bank policymakers.
At the end of this afternoon, Fed Chair, Jerome Powell, is scheduled to speak. Should Powell echo his colleagues in striking a hawkish tone it may boost USD.
Meanwhile, a dovish approach from the European Central Bank (ECB) President, Christine Lagarde, tomorrow may place pressure on the single currency.