Euro stands upright as investors cheer Ukraine talks

FILE PHOTO: Women walk past a plaque displaying the US dollar and euro signs in Saint Petersburg
FILE PHOTO: Women walk past a plaque showing the U.S. dollar and euro signs on a street in Saint Petersburg, Russia February 25, 2022. REUTERS/Anton Vaganov

March 10, 2022

By Alun John

HONG KONG (Reuters) – The euro held on to most of its overnight gains on Thursday after posting its steepest daily jump in almost six years following a meeting between Ukraine’s and Russia’s foreign ministers and oil prices easing some of the recent panic in markets .

Traders are now awaiting a European Central Bank meeting later in the day for signs of how Russia’s invasion of Ukraine will affect monetary policy. US inflation numbers are also due, which could further steer expectations for next week’s Federal Reserve meeting.

The euro traded at $1.1047 after rising 1.6% on Wednesday, its best day since June 2016, along with gains in European equities and a sell-off in bonds.

The common currency had fallen to a 22-month low of $1.0804 earlier in the week, weighed down by the impact of the Russian invasion of Ukraine on European growth.

“One look across the market, particularly in the Eurozone, could forgive any casual observer for thinking that the war in Ukraine could have ended overnight. Unfortunately not,” NAB analysts said in a morning note.

They attributed the euro’s gains to some optimism ahead of a meeting between Russia’s and Ukraine’s foreign ministers – the first meeting between the two since Russia invaded Ukraine two weeks ago – and report that the European Union is discussing the issuance of Bonds discussed to fund energy and defense spending.

Other factors highlighted by NAB were “suspicions that the ECB may not fully reverse its early February ‘hawkish stance’ at its meeting today, as inflation is set to rise further given the recent energy price shock.”

Russia calls its actions in Ukraine a “special operation”.

Elsewhere, sterling was steady at $1.3163 after rising 0.65% alongside the euro overnight, while the safe-haven yen was at 116.09 per dollar, its lowest since March Month.

The dollar index came in at 98.163 after falling 1.2% overnight amid the euro’s rise and suffered along with the yen from increased sentiment towards riskier assets like equities.

US stocks rebounded sharply overnight as global oil prices took their biggest plunge in nearly two years after the United Arab Emirates announced it would support rising production.

This also buoyed the risk-sensitive Australian dollar, which was last seen at $0.7307 after rising 0.7% on Wednesday.

The other major event coming up on Thursday is US inflation data, a particular focus as the Fed meets next week and is widely expected to hike its federal funds rate benchmark by a quarter of a point.

Economists polled by Reuters are forecasting that the US CPI rose 7.9% yoy in February, up from 7.5% in January, although this data will only show a preliminary impact of the rise in oil prices.

(Reporting by Alun John; Editing by Sam Holmes) Euro stands upright as investors cheer Ukraine talks


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