By Peter Nurse
Investing.com – The US dollar gains positions at the start of trading in Europe on Wednesday, while the euro comes under pressure from the escalation of the conflict in Ukraine, which has boosted demand for the global reserve currency.
At 08:55 AM ET, the , which tracks this coin against a basket of six other majors, is up 0.3% at 97.660.
Russian forces have intensified their shelling of Ukrainian cities, warning Kiev residents to leave the city as a several-kilometer convoy of armored vehicles approaches the capital.
This is causing traders to turn to the dollar, the world’s reserve currency, the main safe haven and the most liquid asset.
“The latest headlines that Russia is stepping up nuclear preparations and the West imposing increasingly harsh sanctions, including asset freezes and the exclusion of certain Russian entities from the SWIFT interbank communications network, suggest that the tone of dislike to risk could last all week and possibly longer,” says Matthew Weller, Global Head of Market Research at GAIN Capital.
The ruble continues to slide despite doubling key interest rates to 20% as investors weigh the impact of harsh economic sanctions imposed on Russia.
But of the major currencies, it is the euro that is being hit hardest, as severe sanctions on Russia and rising prices have raised fears of a hit to Europe’s economy and growth.
By 8:55 AM ET (0855 GMT), the pair is up 2.1% to 103.3218, while the pair is down 0.3% to 1.1098, just above fresh lows of 21 months, struggling to hold the 1.1100 support level.
“While there isn’t much reason to go long the euro at the moment, from a technical standpoint the potential seems to be pointing to a squeeze on short positions,” says Jeffrey Halley, OANDA’s senior market analyst for the region. Pacific Asia. “A new meeting between Ukraine and Russia or China’s progress in mediating some kind of ceasefire would be enough to trigger a 200-point rise.”
Traders will be keeping an eye on eurozone data, due later today, as the European Central Bank will have to balance rising inflation against the possibility of the region’s growth slowing. be affected by the Russian invasion of Ukraine.
Elsewhere, the pair is down 0.2% to 1.3292, the is up 0.2% to 115.16, while the risk-sensitive is up 0.1% down to 0.7252, buoyed by data showing the Australian economy performed well in the fourth quarter.
The president of the Fed, Jerome Powell, will appear this Wednesday to discuss economic matters before the Committee on Financial Services of the House of Representatives, and investors will be interested in knowing his opinions on the possible consequences of the conflict in Ukraine, given that it is expected that the central bank will raise interest rates later this month to curb rising inflation.
Lastly, the pair is down 0.1% to the 1.2734 level as the is expected to start raising interest rates this Wednesday with inflation at a three-decade high.