The current uncertainty of the geopolitical conflict around Ukraine has significantly shaken the EUR/USD pair. The weather vane of its dynamics deviated from the sharp drop caused by the collapse of the euro, but it is far from equilibrium.
On Wednesday, the European currency experienced serious pressure amid the escalation of the Ukrainian conflict. The rise in oil prices added fuel to the fire, increasing investors' worries about an economic blow to the eurozone. The single currency slipped below the support level, reaching a 21-month low of 1.1090, but then recovered. The euro was in the 1.1130-1.1131 range at the beginning of trade. The EUR/USD pair was cruising near 1.1114 on Wednesday morning, March 2, trying to get out of the price hole.
According to analysts, the prospects of the European currency are related to the energy security of Europe. A positive solution to the gas issue and the settlement of LNG supplies will help the euro to rise. If the euro fails, a thorny path is provided, analysts believe. According to analysts at Commonwealth Bank of Australia, the risk for EUR "lies in a steady movement below 1.1106 if market participants lower the economic prospects of the eurozone."
Geopolitical passions are boiling in the markets, but many are confident that they do not threaten the dynamics of the euro. Market participants fear disruptions in energy supplies, which worsen the economic situation of the eurozone. The current stability of the euro is ensured by the balanced approach of European leaders to the introduction of anti-Russian sanctions. According to experts, Europe will not impose restrictions that will block its access to Russian energy carriers. In addition, the "green" strategy of European leaders has seen a 180-degree turn. Many EU countries refuse to use "green" technologies in favor of LNG, and are also not ready to reduce coal consumption. Against this background, the impact of the Ukrainian conflict on the economic growth of the eurozone is minimal, experts believe.
Economists are seriously concerned about the intensification of the global humanitarian crisis. In conditions of economic uncertainty, the dollar comes on the scene. Experts attach key importance to the US currency when protecting investment portfolios. UBS currency strategists believe that the greenback as a safe haven currency has a number of advantages and high stability in times of crisis. At the same time, the greenback shows a tendency to rally at times of increased geopolitical uncertainty or risk-free sentiment in financial markets. UBS is confident that market expectations about a sevenfold rise in US interest rates will support USD in the coming months. The greenback is currently the most attractive tool for currency transactions.
