The euro held on to most of its overnight gains, posting its biggest daily jump in nearly six years after a meeting between Ukrainian and Russian foreign ministers and falling oil prices put end to the recent market panic.
Traders are now awaiting a European Central Bank meeting later today for any sign of how Russia’s invasion of Ukraine will affect monetary policy.
US inflation figures are also due, which could further guide expectations for the Federal Reserve meeting next week.
The euro was trading at $1.1047 after jumping 1.6% on Wednesday, its best day since June 2016, accompanied by gains in European stocks and a bond sell-off.
The common currency had fallen to a 22-month low at $1.0804 earlier in the week, weighed down by the impact of Russia’s invasion of Ukraine on European growth.
“A look at the market, particularly the Eurozone, might leave any casual observer forgiven for assuming that the conflict in Ukraine could have ended overnight. Unfortunately, that is not the case,” have said NAB analysts in a morning note.
They attributed the euro’s gains to some optimism ahead of a meeting between the foreign ministers of Russia and Ukraine – the first meeting between the two since Russia invaded Ukraine two years ago. weeks – and reported that the European Union was discussing issuing bonds to fund energy and defense spending.
Other factors highlighted by the NAB were “suspicions that the ECB may not fully reverse its early February ‘hawkish tilt’ at its meeting later today, given that inflation is set to increase even more given the latest shock in energy prices”.
Russia calls its actions in Ukraine a “special operation”.
Elsewhere, the pound was flat at $1.3163 after jumping 0.65% overnight against the euro, while the safe-haven yen was at 116.09 to the dollar, its lowest in one month.
The dollar index was at 98.163, after falling 1.2% overnight amid the surge in the euro, and hurt, along with the yen, by rising sentiment towards riskier assets like stocks. shares.
U.S. stocks rallied sharply overnight as global oil prices posted their biggest fall in nearly two years after the United Arab Emirates said it would support increased production.
It also gave a boost to the risk-sensitive Australian dollar, which was last at $0.7307 after jumping 0.7% on Wednesday.
The other main event scheduled for Thursday concerns inflation data in the United States, a particular focus given that the Fed meets next week and is expected to raise its benchmark overnight interest rate by a quarter. percentage point.
Economists polled by Reuters forecast the U.S. consumer price index rose 7.9% year-on-year in February, from 7.5% in January, although the data shows only a preliminary impact from the surge in oil prices.