Fading Peace Hopes Weigh on the Euro

EUR/USD is currently trading in a narrow range, reflecting market uncertainty. The initial optimism surrounding a potential ceasefire or peace deal in Ukraine is demonstrably waning, a sentiment echoed by the EUR/CHF currency pair retreating to the 0.9370 level, according to ING's FX analyst Chris Turner.

The Euro is expected to trade within a tight band of 1.1620-1.1670. Turner points to Russian Foreign Minister Sergei Lavrov's recent statement that Russia and China must be part of any future security guarantees, suggesting a continued divide between the West and Russia. The analyst also suggests a possible return to secondary sanctions by Washington. The recent rise in oil and natural gas prices adds further mild negative pressure to the Euro.

“We may see another tight 1.1620-1.1670 trading range in EUR/USD today, with the biggest chance of a breakout remaining Powell's speech tomorrow.” Traders should monitor geopolitical developments and energy price movements closely to assess their potential impact on the Euro.

Geopolitical Risks and Euro Volatility

The ongoing conflict in Ukraine is a key driver of Euro volatility. Market sentiment is highly sensitive to news regarding potential peace negotiations, sanctions, and energy supplies. Deterioration in the situation could lead to further Euro weakness.

Focus on Powell's Speech

The market is anticipating Jerome Powell's speech, where insights into the Federal Reserve's monetary policy outlook could trigger a breakout from the current trading range. A hawkish stance from Powell could strengthen the US dollar, putting downward pressure on EUR/USD.

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