It’s been a dramatic afternoon, as EUR/USD has rocketed in the North American session, gaining 1.16%. The pair is currently trading just above the 1.11 level.
Euro flies as peace talks show progress
The euro has been showing limited movement for a week, which led me to caption Monday’s post as, “Euro looking for direction”. Twenty-four hours later, my heading looks outdated, as the euro has leaped upwards and posted massive gains of 120 points, breaking past 1.10 and then the 1.11 level.
The driver behind this impressive and unexpected jump was news that Russia had softened its position at the negotiating table. In talks held in Turkey today, Russia said that it was scaling down its forces in northern Ukraine and held out the possibility of direct talks between Russian President Putin and Ukrainian President Zalensky, once the sides had prepared a draft peace treaty.
As anyone who is following the war can attest to, anything coming out of Moscow has to be taken with more than a grain of salt. There has been speculation that Russia is using the peace talks as a cover to reorganize its forces, after being held to a stalemate by the outnumbered and outgunned Ukrainian army. Moscow may have decided to focus its efforts in the eastern part of Ukraine and consolidate its grip on areas it has already conquered. President Zalensky has reiterated that Ukraine will not compromise on any of its territory, so there are still large gaps between the sides.
Still, the markets jumped on positive news out of Ukraine, and European equity markets have climbed around 2% today. After starting the day in quiet mode, the euro has sparkled and jumped over 1 per cent. The massive move illustrates that to a very large extent, the euro’s movement is being dictated by developments in Ukraine, and what goes up can quickly come down, if the apparent progress in the peace talks turns out to be another dead end and the crisis worsens.
- EUR/USD has support at 1.1053 and 1.0940
- There is resistance at 1.1274, followed by 1.1441