EUR/USD Higher On Hopes For Ukrainian Russian Dialogue

EUR/USD is trading near the highs of the day as markets hold higher hopes of a breakthrough in the dialogue between Russia and Ukraine. An interview between Ukraine’s president and ABC News from Monday night is being reported on in New York trade by AP News Service.

The article has highlighted the point that Ukraine was not on the verge of becoming a NATO member and the markets are interpreting Volodymyr Zelensky’s comments as withdrawal from applying for NATO membership.

However, the fact of the matter is countries who wish to join NATO need to meet certain political, economic, and military goals. Ukraine was not formally ready to join NATO. There are a lot of criteria for NATO membership and Ukraine does not really meet any of those.

Zelensky has confirmed that he is no longer pressing for NATO membership in Ukraine. Additionally, Zelensky said he is open to compromise on the status of two breakaway pro-Russian territories that President Vladimir Putin recognized as independent just before unleashing the invasion on February 24.

Markets are hopeful that there can be dialogue soon and a cease-fire that could lead to an easing on sanctions that will ultimately avert an even more bloody global war.

Markets now await the outcome of Thursday’s European Central Bank policy meeting. There is the prospect of stagflation prompting economists to suggest that policymakers might delay rate hikes until the end of the year.

Uncertainty and flexibility will be the theme, with nowhere near enough time or confidence to assess the impact of the rapidly-evolving situation in Ukraine on the forecast. The Governing Council does need to address risks from accelerating inflation, which is running 1.5ppt above their Dec forecasts.