- EUR/USD dropped after confirmation of Putin’s recognition of breakaway Ukrainian regions which triggered fears of further escalation.
- US President Joe Biden has signed an executive order to prohibit trade and investment between US individuals and the two breakaway regions of eastern Ukraine.
- Federal Reserve sentiment favors the US dollar and adds pressure to the Euro.
Euro dipped against the US dollar during Tuesday Asian session, weighed by risk-off tones after critical developments at the Kremlin.
Investors brace for heavy fall in the financial Markets after Vladimir Putin upped the ante in a crisis the West fears could unleash a major war.
In a lengthy televised address, the Russian president recognised two breakaway regions Donetsk and Luhansk in eastern Ukraine as independent entities and described Ukraine as an integral part of Russia’s history. Whether the action was the start of an invasion of Ukraine is not clear yet, but the West has begun to respond by preparing sanctions.
Meanwhile, President Joe Biden issued an executive order that White House spokesperson Jen Psaki said would “prohibit new investment, trade, and financing by U.S. persons to, from, or in the so-called DNR and LNR regions of Ukraine,” referring to the self-proclaimed Donetsk People’s Republic and the Lugansk People’s Republic.
Psaki said additional measures would come on Tuesday. Those, according to another White House spokesperson, would be directed at Russia.
Amidst the geopolitical tension in Ukraine weighing on Euro, Hawkish Fed speak on Monday also underpinned the bearish trend of EUR/USD.
FOMC member Michelle Bowman said it was too early to know if the US economy needs a 50bps rate hike in March, the topic was on the table for officials to debate. This comes before data that will likely show the Fed’s key inflation index has jumped to a new four-decade high in January, thus rising the expectation for higher rates.
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