Ukraine Crisis Easing, EUR/USD Consolidating

The Ukraine crisis is entering a new favorable phase for EUR/USD. The West and Russia have signaled a willingness to make peace, but there has been no real commitment.

The euro rallied rapidly in yesterday's New York trading session on news that Russia had withdrawn some of its troops from the Ukrainian border. When the news was written in the Asian session (16/February), EUR/USD was continuing its consolidation around the 1.1350s.

EUR/USD Daily chart via TradingView

The Russian Ministry of Defense announced yesterday that it has returned a number of soldiers back to base after military training in an area near the Ukrainian border. The news jumped the euro and hit the US dollar towards the end of the New York session. However, follow-up news from the US stronghold this morning curbed the EUR/USD movement.

US President Joe Biden said that his party had not been able to verify the Russian announcement. He considered 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 suffered hacker attacks - suspected of being deployed by the Russian government -.

Analysts warn that the geopolitical situation is not yet stable. In addition, the policy directions of the European central banks and the Federal Reserve will continue to have a large influence on EUR/USD and other currency pairs in the forex market.

"This (news of the return of Russian troops to headquarters) seems to have helped sellers capture more buyers in early trading....shows the risk of the news surrounding trading and shows the sensitivity of the market 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 the Ukraine geopolitical risk premium was washed off the market, but expectations of an aggressive Fed rate hike cycle should keep the basis for the (dollar index) holding its ground," analysts at Westpac said in a note to clients cited by Reuters.