Euro rebounds as Ukraine tensions ease

The euro has reversed directions on Tuesday, ending a mini-slide that saw the currency drop over 1%. EUR/USD is trading at 1.1353 in the European session, up 0.41% on the day.

For those investors getting a headache from non-stop coverage of the Ukraine crisis on BBC or CNN, may I suggest an alternative. The euro has been acting as a barometer of the crisis, with the currency falling in recent days as a Russian invasion appeared imminent. However, the euro has recovered on Tuesday, as the crisis appears to have de-escalated slightly. This follows reports that some Russian troops have pulled back, which is certainly a step in the right direction. If the situation on the frozen ground continues to improve, I would expect the euro to gain more ground.

In the eurozone, there was positive news which helped boost the euro. Eurozone GDP rose by 0.3% q/q in Q4, and the labor market continues to strengthen as employment has surpassed the pre-pandemic level (February 2020). A tight labor market and rising inflation are putting pressure on the ECB to respond by raising interest rates. We have seen the dovish Christine Lagarde bend slightly and sound less dovish, although the markets are more hawkish in their pricing of a rate hike than the central bank.

German Economic Sentiment hits 6-month high

German ZEW Economic Sentiment for February rose to 54.3, up from 51.7 and its highest level in six months. This missed the consensus of 55.0 but still points to an optimistic outlook of the economy over the next six months. Importantly, the survey found that financial experts expect inflation to decline, although more than half say that the ECB will raise rates before September. The markets expect the ECB to raise rates by 40 basis points by the end of the year.

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EUR/USD Technical

  • EUR/USD faces resistance at 1.1452 and 1.1556
  • There is support at 1.1287 and 1.1226

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including Investing.com, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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