Around 8 p.m., the euro climbed 0.02% to 1.0942 dollars per euro, remaining close to its recent lows after rising earlier in the session.
The euro stabilized against the U.S. dollar on Tuesday as investors followed Russia-Ukraine talks as the Russian offensive intensifies, while anticipation of the Fed’s monetary decision backed at the dollar again.
Around 8:00 p.m. GMT, the euro climbed 0.02% to 1.0942 dollars per euro, remaining close to its recent lows after rising earlier in the session.
The Russian offensive in Ukraine intensified on Tuesday, with a series of strikes on kyiv placed under curfew, despite a resumption of talks aimed at reaching a ceasefire and a major concession from the Ukrainian president, who s is said to be ready to give up NATO membership.
On the negotiations, the Kremlin considered premature any “prognosis” on Tuesday, while an adviser to the Ukrainian presidency considered a peace agreement possible by “end of May”.
But eyes were mainly on the US central bank (Federal Reserve, Fed). Investors expect it to kick off its round of rate hikes as early as Wednesday, following a two-day monetary meeting.
“A 25 basis point increase was well telegraphed by (Fed Chairman) Jerome Powell and widely expected by economists and markets,” Scotiabank’s Shaun Osborne said, explaining the dollar’s lower profile in recent days. .
But investors will watch for “quantitative tightening plans”, that is to say the instructions for reducing the Fed’s balance sheet and above all its economic forecasts, in particular inflation, as well as its projections for median change in rates.
“The Currency Committee’s dot plot will give markets a decent signal of how high the Fed expects its key rate to be by the end of 2022,” Osborne said, noting that markets expect out of seven rate hikes by the end of the year, one at each meeting.
There remains “a fairly significant difference between the monetary policy of the Fed and that of the ECB (European Central Bank). The US central bank is ready to fight inflation now, while the ECB is still hesitating,” said You-Na Park-Heger, an analyst at Commerzbank.
In other words, while the rise in interest rates in the United States is “relatively certain”, it is much less so in the euro zone, underlines the analyst. “And that’s not exactly in the direction of an appreciation of the euro against the dollar at the moment.”
“The Fed remains embroiled in a fierce battle against rising prices,” confirms Lukman Otunuga, analyst at FXTM.
Inflation in the United States rose to 7.9% year on year in February, the largest year-on-year price increase since January 1982. The ECB currently forecasts inflation of 5.1% this year in the euro area.