• Euro trades higher with hopes of dialogue as Ukraine retreats from NATO membership and ready to compromise.
• Investors were also hesitant to sell the euro ahead of a European Central Bank policy meeting on Thursday.
• Upbeat prints of German Industrial Production (IP) for January favors the Euro bulls, However Ukraine- Russia crisis eyed.

Euro climbs higher against the greenback as market hope for a breakthrough in the dialogue between Russia and Ukraine. It is also partly lifted by expectations that the euro zone will increase fiscal spending to help offset the economic effects of Russia’s invasion of Ukraine. However, Thursday’s key meeting in Ankara and fears of stagflation undermines the pair EUR/USD.

An interview between Ukraine’s president and ABC News from Monday night is being reported on in New York trade by The Associated Press. The article 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.

But countries need to meet certain political, economic, and military goals to join the NATO. 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.

Now, President Volodymyr Zelensky has confirmed that he is no longer pressing for NATO membership in Ukraine. Moreover, 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. Thus, Investors are expecting  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.

Meanwhile, Investors were also hesitant to sell the euro ahead of a European Central Bank policy meeting on Thursday. The prospect of stagflation has prompted economists to suggest policymakers might delay rate hikes until late in the year.

Bloomberg News reported on Tuesday that “European Union plans as soon as this week to jointly issue bonds on a potentially massive scale to finance energy and defense spending.”

On the data front, Upbeat prints of German Industrial Production (IP) for January and GDP quarterly report favored EUR/USD bulls. German IP marked the strongest monthly growth since 2020 with a 2.7% mark. The data published by Eurostat showed on Tuesday that seasonally adjusted Gross Domestic Product (GDP) in the euro area expanded by 0.3% on a quarterly basis in the fourth quarter. This print came in line with the initial estimate and the market expectation. Compared with the same quarter of the previous year, GDP grew by 4.6%. Moreover, An increase in Eurozone’s Employment Change YoY for Q4, to 2.2% versus 2.1% expected and prior also favored the EUR/USD bulls.

However, analysts said the euro is unlikely to rise much while there is so much worry about the war in Ukraine spreading. Fighting has not abated.

EUR/USD 4 Hour Chart:

Support: 1.0844 (S1), 1.0791 (S2), 1.0734 (S3).

Resistance: 1.0953 (R1), 1.1010 (R2), 1.1063 (R3).

The upbeat data and hopes of breakthrough in the dialogue between Russia and Ukraine favors the Euro bulls. We expect a bullish trend for EUR/USD.