Euro weakens on Ukraine fighting

The euro has lost ground on Tuesday and fallen below the 1.12 level. In the European session, EUR/USD is trading at 1.1173, down 0.40% on the day.

The fighting has intensified in Ukraine, with a Russian armored column stretching for miles slowly winding its way towards the capital Kyiv. Russian forces have been shelling major cities, as defiant Ukrainians brace for the fighting to intensify. The US dollar has been flat today against the majors, with the dollar index up slightly to 96.99. EUR/USD actually showed gains in the Asian session but has since reversed directions.

Risk appetite remains subdued, but there appears to be less pessimism and panic in the markets compared to the past few days. This could be based on the notion that investors feel that the bulk of the West’s sanctions against Moscow has already been announced, so “the worst is behind us”. This could quickly change of course, based on developments on the ground in Ukraine. As well, Russia will not take these sanctions lying down, and its response could dampen risk sentiment. Investors remain glued to the crisis, which has been the driver of the direction of the markets and is overshadowing economic releases.

German CPI expected to accelerate

On the economic calendar, German CPI, which will be released later today, is a key event. The ECB is keeping a watchful eye on rising inflation and some ECB members want the central bank to take a more hawkish stance in order to contain inflationary pressures. German CPI is expected to rise 0.9% m/m in February, up sharply from 0.4% in January. On an annual basis, CPI is projected to hit 5.1%, up from 4.9% beforehand. The ECB holds a policy meeting on March 10^th, and a jump in German inflation will put pressure on ECB President Lagarde to tighten policy.

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EUR/USD Technical

• There is resistance at 1.1406 and 1.1538
• There is major support at 1.1100. Below, there is support at 1.0974

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