EUR/USD spikes to three-month high on positive Ukraine-Russia peace talks

Philip McHugh March 30th 2022 - 2 minute read

The euro skyrocketed on Tuesday as hopes for a negotiated end to the war in Ukraine were bolstered in the wake of constructive peace talks between Ukraine and Russia.

Meanwhile, the pound is mostly trading in a narrow range so far this morning, with GBP/EUR flat at €1.1799 and GBP/USD stable at $1.3119. GBP/CAD is rangebound at C$1.6378, while GBP/AUD and GBP/NZD hold steady at AU$1.7422 and NZ$1.8831, respectively.

Coming up, will a surge in German inflation help the euro to maintain a positive trajectory today?

What’s been happening?

The euro shot higher yesterday, as positive progress in Ukraine-Russia peace talks lit a fire under the single currency.

EUR investors cheered the news that Moscow will ‘drastically reduce military activity’ around Kyiv and Chernihiv, amidst hopes this could pave the way toward a ceasefire in the near-term.

The pound also benefitted from the positive mood on Tuesday, although its gains remained capped in light of some dovish comments from Bank of England (BoE) Governor Andrew Bailey on Monday.

Conversely the US dollar was placed on the defensive as risk-on flows saw investors shun the safe-haven ‘greenback’.

What’s coming up?

Looking ahead, its likely events in Ukraine could continue to act as a key catalyst of movement in currency markets. If Russia follows through with its plan to withdraw forces from around Kyiv then a risk-on mood may continue to prevail.

On the data front the spotlight today will be on Germany’s consumer price index. March’s CPI figures are forecast to show German inflation rocketed up from 5.1% to 6.3%.

Such a dramatic surge in inflation in the Eurozone’s largest economy could revive speculation the European Central Bank (ECB) interest rate hike before the end of 2022.

Barring any surprises from the latest US GDP estimate, the focus for USD investors today will be on the latest ADP employment figures. Could a robust reading bolster expectations for Friday’s more influential non-farm payroll print?

In the meantime, a speech by BoE policymaker Ben Broadbent could infuse some volatility into the pound today, if he echoes Bailey’s dovish comments from earlier in the week.

Written by
Philip McHugh

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