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EUR/USD recaptures $1.10 on hopes for diplomatic solution to Ukraine

currency-newsEUR/USD recaptures $1.10 on hopes for diplomatic solution to Ukraine
The euro rocketed higher on Wednesday, underpinned by hopes for a diplomatic solution to the war between Ukraine and Russia.

Meanwhile, the pound is mostly rangebound so far this morning, with GBP/EUR flat at €1.1916 and GBP/USD stable at $1.3187. GBP/CAD is rangebound at C$1.6885, while GBP/AUD and GBP/NZD tick down to AU$1.7963 and NZ$1.9251, respectively.

Looking ahead, the euro could extend its rally this afternoon if the European Central Bank (ECB) hints at the possibility of a rate hike later in the year.


What’s been happening?

The euro enjoyed strong support yesterday, with the single currency reclaiming a good portion of its recent losses amidst hopes for a swift end to the Russia-Ukraine war.

This followed a temporary ceasefire at some key cities to allow civilians to flee via humanitarian corridors and well as suggestions Ukraine will no longer insist in being able to join NATO, offering a key concession to Russia ahead of the latest round of peace talks in Turkey on Thursday.

The pound was also supported by hopes for a diplomatic end to the war in Ukraine, albeit not to the same extent at the euro.

At the same time, weaker safe-haven demand sapped the appeal of the US dollar on Wednesday, although its losses were tempered somewhat after the latest JOLTs figures reported an unexpected rise in US job openings in January.


What’s coming up?

Turning to today’s session the war in Ukraine may take a backseat in the face of the European Central Bank’s latest interest rate decision as well as the publication of the US consumer price index.

First up will be the ECB, which is widely expected to leave interest rates on hold again this month with the primary focus being on the bank’s policy outlook.

If the ECB signals it might need to response to the record rise in inflation then this is likely to reignite hopes for a 2022 rate hike and could send the euro higher.

For USD investors the focus will undoubtedly be on the US CPI print, which is expected to report US inflation rocketed up to 7.9% in February.

Another sharp acceleration in inflation will further bolster expectations the Federal Reserve will pursue an aggressive approach to monetary policy this year.

Meanwhile in the absence of any notable UK data, the pound could struggle to find its own momentum today.
Philip McHugh

Philip McHugh

Joining the corporate trading desk in 2007, Phil now over sees all of Currencies Direct’s corporate dealing activity. Having gained experience working with hundreds of businesses to optimise international payments processes and execute comprehensive risk management strategies, Phil currently works with a portfolio of corporate clients whilst managing Currencies Direct’s overall market exposure

Phil has FCA approval and has completed the Certificate in International Treasury Management (CertiTM)

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