Euro Bounces Strongly As Risk Rebounds

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The euro came off fresh May 2020 lows seen around 1.0800 at the start of the week to get back to the 1.1000 figure as risk trades bounced during the European session on Wednesday. However, as geopolitical tensions surrounding Ukraine keep rising, it looks like equities and other high-yielding assets including the euro are now enjoying just a short-lived relief, with downside risks persisting.

Earlier today, the EU announced new sanctions on Russia. In particular, additional 160 Russian individuals have been listed in restrictions. At the same time, there are reports that Germany is opposing measures against Russian oil imports and port access. Also, Germany is resisting EU efforts to ban Russia's Sberbank from SWIFT. 

Meanwhile, Russia and Ukraine foreign ministers are expected to meet in Turkey on Thursday, with investor focus now shifting to this event. Of note, Ukraine's Kuleba said he has limited expectations from talks with Lavrov. It looks like markets don’t express much hope for the dialogue as well, considering that the demands and conditions by Moscow and Kyiv remain unchanged at this stage. 

As for the common currency itself, it looks like the continued uncertainties about the Ukraine conflict will cap a more decisive rebound as the safe-haven dollar will keep benefiting from geopolitical events. In other words, the EURUSD pair could see fresh lows below 1.0800 after the current bounce that may attract fresh selling pressure in the short term.

The USD index peaked at 99.40 on Monday before entering local technical correction that took the greenback to 98.40 in recent trading. The next support now arrives at 98.00, but in a wider picture, the prices will keep targeting the 100.00 psychological barriers last seen in April 2020.