Russia's Invasion Of Ukraine Is A Little Calm, EUR/USD Strengthens

EUR/USD is up as the Russian invasion of Ukraine softens today. However, uncertainty still haunts amid the threat of sanctions on energy imports.

The euro bounced up from a 22-month low in the trading session on Tuesday (08/March) tonight. After losing more than three percent since February 24, EUR/USD is now inching up 0.23% to trade at 1.08787.

Russia has not yet halted attacks on what it calls a "special military operation" in Ukraine despite the ongoing phase three negotiations today. However, the Red Bear invasion was considered a bit more calm because the Ukrainian government was still given the opportunity to evacuate its citizens from the cities which were already surrounded by Russian troops.

Meanwhile, Deputy Prime Minister of Russia, Alexander Novak, has threatened to stop gas supplies to Europe if the Western bloc dares to impose sanctions on Russia's energy import sector. Novak warned that doing so could send oil prices past $300 a barrel.

The statement was in response to news about US President Joe Biden possibly announcing a ban on imports of Russian oil in the near future. If enforced, the annual import of US oil from Russia could be cut by 8%. So far, Western sanctions on Russia are still focused on the banking sector and financial networks.

Europe's own economic outlook has become bleak since Russia invaded Ukraine. This is because Europe imports around 40 percent of its natural gas needs and 25 percent of its oil needs from Russia. It is feared that the increase in energy prices and a number of goods will further trigger stagflation.

EUR/USD Volatility Increases Sharply

The euro weakened because it is a high-risk currency and is closest to areas of conflict. In a situation of geopolitical conflict, safe haven currencies such as the US Dollar, Swiss Franc and Yen are the most sought after assets.

For some time to come, traders will analyze EUR/USD more from a technical point of view, because from a fundamental point of view it is too uncertain. The volatility of the currency pair is predicted to increase in a choppy trend. In general, the current EUR/USD volatility has increased rapidly to its highest level since April 2020.

"The price action appears to reflect the growing fears of a deepening slowdown or recession in the global economy on the back of volatility in energy prices," said currency analysts at MUFG.