The Ukrainian crisis is entering a new phase that is favorable for EUR/USD. The West and Russia have signaled a willingness to make peace, but there has been no real commitment.
The euro rose rapidly in New York trading yesterday on news that Russia had withdrawn some of its troops from the Ukrainian border. At the time of writing in the Asian session (16/February), EUR/USD is continuing to consolidate around the 1.1350s.
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| EUR/USD Daily chart via TradingView |
The Russian Defense Ministry announced yesterday that it had sent a number of soldiers back to base after military training in areas near the Ukrainian border. The news immediately surged the euro and hit the US dollar towards the end of the New York session. However, further news from the US camp this morning curbed the movement of EUR/USD.
US President Joe Biden said it was not yet able to verify Russia's announcement. He assessed that the deployment of Russian troops near Ukraine was still a threat. Meanwhile, Ukraine reported that the Ministry of Defence, banking, and a number of other important computer networks had been attacked by hackers suspected of being deployed by the Russian government.
Analysts caution that the geopolitical situation is not yet stable. In addition, the policy direction of the European central bank and the Federal Reserve will continue to have a major influence on EUR/USD and other currency pairs in the forex market.
"This (News of the return of Russian troops to base) seems to be helping the sellers catch more buyers in early trade....shows the riskiness of the news surrounding trading and shows the market's sensitivity to the situation there. What is going on is far from clear - be careful," said Neil Wilson, Chief Market Analyst at Markets.com.
"(The US dollar) fell overnight as Ukraine's geopolitical risk premium faded from the market, but expectations of the Fed's aggressive rate hike cycle should maintain the basis for (the dollar index) to hold its ground," analysts at Westpac said in a note to clients cited by Reuters.
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