Euro US Dollar Exchange Rate Subdued as Russia-Ukraine Talks Fail to Reach Solution
The Euro US Dollar (EUR/USD) exchange rate is trading in a narrow range after yesterday’s meeting between Russian and Ukrainian officials failed to find a diplomatic solution to the current conflict.
At the time of writing, the EUR/USD exchange rate is trading at around $1.0984, with minimal movements from today’s opening levels.
Euro (EUR) Mixed as War in Ukraine Intensifies
The Euro (EUR) is muted against the US Dollar (USD) following yesterday’s failed peace talks.
This is the third round of talks which have ended at an impasse, with both Russia and Ukraine sounding downbeat on the chances of a negotiated end to the conflict.
Reports of Russia preparing for renewed attacks on Kyiv, as well as overnight bombings on various Ukrainian cities, indicate the war is in fact continuing to escalate.
Meanwhile, the Euro also remains muted in the wake of the European Central Bank (ECB) latest policy meeting.
The ECB left interest rates on hold again this month, whilst also signalling plans to accelerate the winding down of its asset purchase programme.
EUR investors were initially hopeful this could pave the way for a rate hike at the end of this year, however these expectations were tempered by some cautious comments from ECB President Christine Lagarde in a subsequent press conference.
Lagarde, said:
‘Any adjustment to the key ECB interest rates will take place some time after the end of our net purchases under the APP (Asset Purchase Programme) and will be gradual.
‘The path for the key ECB interest rates continues to be determined by the Governing Council’s forward guidance and by its strategic commitment to stabilise inflation at 2% over the medium term.’
Moreover, German inflation was confirmed to have risen from 4.9% to 5.1% last month, with data released this morning printing in accordance with preliminary expectations. This is limiting the Euro’s losses against the US Dollar today.
US Dollar (USD) Rangebound Following ‘Blazing Pace’ of US Inflation
The US Dollar (USD) is flat against the Euro (EUR) today despite yesterday’s US inflation print.
The ‘Greenback’ is still receiving some support from yesterday’s inflation reading for February, which printed at 7.9%, up from January’s 7.5% and is the highest reading since 1982.
In turn, this may further aid a 25-basis-point rate hike at the next Federal Reserve meeting and bolster USD.
However, the high inflation is weighing on US citizens as consumer prices continue to rise and unsettle policymakers’ decisions.
Wells Fargo economist Sarah House said:
‘Inflation continues on at a blazing pace. Consumers and policymakers remain in a deeply uncomfortable state as a result.’
Still to come today is the publication of the University of Michigan’s latest consumer sentiment index. Will another drop in US consumer morale exert some pressure on the US Dollar this afternoon?
Euro US Dollar Forecast: Ukraine Crisis to Remain in Centre Stage
For the foreseeable future, the Russia-Ukraine war will continue to act as key driver for movement in the Euro US Dollar exchange rate.
Elevated geopolitical uncertainty is likely to see the safe haven currency bolstered further whilst the Euro is likely to struggle against some of its peers.
Into next week, the USD may be supported by strong US PPI figures.
On the other hand, EUR may be dampened further by weak German economic sentiment.