Russia's attacks are getting fiercer, the euro is getting battered

The euro exchange rate took a hit because market players were worried that Russia's invasion of Ukraine would hurt European economic growth

The euro was stuck below the threshold of 1.1100 against the US dollar at the start of the European session trading (3/March), still near its lowest range since May 2020. Market participants worried that Russia's invasion of Ukraine would hurt European economic growth, while monitoring the second round of Russian-Ukrainian negotiations which will be held today.

EUR/USD Daily chart via TradingView

Russian troops successfully occupied Kherson, one of Ukraine's main port cities on the Black Sea. Meanwhile, Russia continues to bombard a number of other big cities such as Kharkiv and Kyiv.

AUD/USD Volatile in Response to Latest Russia-Ukraine News

The United Nations passed a resolution supported by 141 out of 193 members condemning Russia. More and more severe sanctions have been imposed on Moscow, including the expulsion of a number of Russian banks from the SWIFT network - one of the "nuclear options" previously opposed by some European Union countries -.

This situation triggered an increase in world crude oil prices. Yesterday, the price of Brent crude oil penetrated USD 120 per barrel, while WTI is still circulating in the range of USD 115 per barrel. The increase in oil prices reflects the worsening energy crisis and could make life even more difficult for Europeans.

EUR/USD Consolidating Amid Russia-Ukraine Talks

Various European countries are still having difficulty breaking away from dependence on Russia's energy supply, so sanctions on Russia also have a boomerang effect for them. Moreover, Russia and Ukraine are important exporters of agricultural products. Divestment by multinational companies has the potential to occur not only in Russia, but also in Ukraine and several neighboring countries.

"In the current crisis, we view the status of the euro as fragile," said Jane Foley, senior FX strategist at Rabobank, "At the corporate level, there is a complex web of relations between the European Union and Russian companies, especially in the energy sector. Energy prices have been increasing higher, as have a variety of agricultural products. Hence, the war in Ukraine signifies high inflation for a longer period of time and potential for slower economic growth."

Russia Subject to Sanctions, Calm Euro and Mighty Oil

Market risk sentiment is likely to continue to be volatile, keeping the outlook for the euro volatile. Today's second round of Russian-Ukrainian talks is in the spotlight, alongside Russia's military action and subsequent Western sanctions.