The Euro climbed to a one-week high against the US Dollar on Thursday, driven by news that Washington plans to initiate talks with Russia to end the war in Ukraine, which overshadowed a higher-than-expected US consumer price report.
US President Donald Trump announced late Wednesday that both Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy had expressed interest in peace during separate phone calls with him.
Trump also directed senior US officials to start negotiations aimed at ending the conflict in Ukraine.
The Euro surged to $1.044025, its highest level since 5th February, and was trading up 0.49% at $1.0434 at the time of writing.
Bart Wakabayashi, Tokyo branch manager at State Street, attributed the Euro’s rally to a “relief factor for Europe,” given the war’s negative economic impact on the region.
“It’s on their doorstep, so if the headlines are of moving towards a peace agreement, that should definitely be a positive for Europe,” he said.
The Russian Rouble soared overnight to a 4.5-month high against the Dollar, Reuters reports.
Hopes for a swift resolution to the Ukraine war helped offset the impact of Wednesday’s higher-than-expected US consumer price data, as both headline and core inflation figures exceeded forecasts.
The inflation data led market participants to increase bets that the Federal Reserve will keep interest rates elevated for an extended period.
“The Fed will now have ample justification to stay on hold and be able to see what government policies come into force and gauge their effects,” according to Tom Nakamura, currency strategist and co-head of fixed income at AGF Investments.
In addition to tariffs, US policies on immigration, taxes, and regulation could also influence the economy’s trajectory.
Speaking at his second congressional hearing this week, Fed Chair Jerome Powell reiterated on Wednesday that the central bank is in no hurry to cut interest rates.
Following the latest data, markets have priced in 30 basis points of rate cuts for this year, down from around 37 basis points previously.
The US producer price index, set for release later on Thursday, will offer insights into how strong the Personal Consumption Expenditures (PCE) price index – the Federal Reserve’s preferred inflation gauge – might be when it is published on 28th February.