US-Russia Ready to Talk, Forex Market Uneasy

There is a decline in interest in safe haven assets in the forex market ahead of crucial discussions between the US and Russia next week.

The US dollar index (DXY) moves sideways, tends to be under pressure around 95.70 in early trading in the European session today (18/February). As well as the latest FOMC minutes which lacked information, the greenback was also sluggish due to reduced interest in safe haven assets ahead of crucial discussions between US and Russian officials. However, the weakening of the US dollar and other safe haven assets tends to be limited because the development of the next Ukrainian crisis is still difficult to predict.

US-Russia Ready to Talk, Forex Market Uneasy

The US State Department said US Secretary of State Antony Blinken had accepted an invitation to meet with Russian Foreign Minister Sergei Lavrov next week, provided that Russia did not invade Ukraine. This news relieved market anxiety that has spread since news emerged of clashes between Ukrainian government troops and pro-Russian rebels in Donbass.

"A confirmed meeting between Blinken and Lavrov may mean market conditions remain stable through the weekend, but risk appetite is likely to be on hold until the meeting (actually) takes place," said Derek Halpenny, analyst at MUFG.
"The tug-of-war from the Ukraine crisis continues to dominate the forex market, but investors have become wiser after the optimism that emerged amid early signs of de-escalation. The end result in (market) forex is to lock major currencies further into tight trading ranges," UniCredit analysts said in a note to clients cited by Reuters.

At the time of writing, EUR/USD is still consolidating around the 1.1370s for the third day in a row. USD/JPY recorded a daily gain of more than 0.2 percent, but was also unable to offset the losses that occurred the previous trading day. Crude oil and gold commodity prices also underwent limited correction following the circulation of this news.