Euro US Dollar (EUR/USD) Exchange Rate Sours as the West Sends Tanks to Ukraine
The Euro US Dollar (EUR/USD) exchange rate is slipping today amid concerns of the Ukraine conflict escalating. The West have answered Ukraine’s pleas for heavy metal as Germany approves the delivery of Leopard tanks to the frontline.
At time of writing, the EUR/USD exchange rate is around $1.0860, a 0.27% fall from this morning’s opening levels.
Euro (EUR) Slips on Escalating War Fears
The Euro (EUR) exchange rate is subdued this morning in the wake of news of Germany supplying Ukraine tanks. Kyiv has been calling for battle tanks from the west for months, and in a move that will no doubt irk Putin, the west obliged.
Germany announced plans this morning to deliver an initial shipment of 14 Leopard 2 tanks and approve shipments from its allies. The aim is to supply Ukraine with two battalions, also providing ammunition, training, and maintenance. Moscow has responded by claiming the move is ‘blatant provocation’ and will prolong the war. Earlier in the week, Dmitry Medvedev, ally of Putin, said that a nuclear power facing defeat could use nuclear weapons.
The optimism that has surrounded the Euro lately could now be dissipating over concerns of the Ukraine conflict. 11 months have passed since Russia invaded Ukraine and the economic fallout from the conflict has economically crippled much of the Eurozone. Investors will be looking towards the Kremlin and how they will respond to the West’s latest wave of support.
US Dollar (USD) Undermined by a Cautious Market
Meanwhile, the US Dollar is struggling to find a clear direction today as an indecisive market made for choppy trading conditions.
Modestly elevated rate hike expectations could be providing the ‘Greenback’ with some support today. Weak PMI data from yesterday initially saw the US Dollar dip, but the underlying optimism of further rate hikes lent support. Chris Williamson, Chief Business Economist at S&P Global, commented on the data:
‘The rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks.’
Euro US Dollar Exchange Rate Forecast: US GDP Growth to Buoy the Greenback?
Looking ahead, the Euro US Dollar exchange rate could see further movement, and a further weakening of the pairing, if US GDP growth data prints to forecast. An expected second consecutive month of quarterly growth points to a resilient economy, bolstering expectations of further rate hikes from the Federal Reserve.
Meanwhile, EUR investors will be keeping an eye on developments in Ukraine. An escalation of conflict could weigh heavily on the single currency, keeping a firm lid on any gains.
