The US currency started the new week on the positive side, continuing the upward trend. Against the background of the steady growth of the greenback, the euro's positions are significantly shaken. The markets are afraid that the EUR will not only dive to the bottom, but will remain there indefinitely.
Earlier, experts considered an early interest rate hike by the European Central Bank to be a lifeline for the euro. The ECB was strongly advised to follow the path of the US one and raise the rate at almost every meeting. However, the escalation of the military conflict around Ukraine has made its own adjustments. At the moment, European leaders are engaged in the implementation of the next sanctions against Russia. Note that the international assets of the Bank of Russia came under attack.
The current situation has become a powerful driver of greenback growth and weakened the euro's position. On the morning of Monday, February 28, the US currency soared against the European one amid the global flight of investors from risk. The reasons are the complication of the geopolitical situation around Ukraine and the introduction of economic restrictions against Russia. The EUR/USD pair was near 1.1162, having significantly sank from the level of 1.1267 recorded at the close of the last session.
According to analysts, the greenback's rally in relation to the euro is due not only to the widespread withdrawal of investors from risk, but also to the collapse of US stock futures. On the last day of February, futures on American securities fell along with the euro, while the safe haven currencies, the dollar and the yen, became market favorites in terms of demand.
The "black swan" of geopolitics has made significant adjustments to the expectations of the Federal Reserve and ECB rate hikes by the markets. At the moment, these measures have receded into the background, although the US central bank does not intend to reconsider the tightening of monetary policy due to the Ukrainian conflict. The changes in the monetary policy should help the growth of the greenback, but the simultaneous fall of the US stock market and the stock market will turn the situation 180 degrees. With the tightening of the monetary policy, investors will massively withdraw from long US debt securities, while the US stock market will stay afloat. Such an ambiguous situation can shake the USD positions.
Currently, the US currency is supported by fears of possible negative consequences of anti-Russian sanctions. Many analysts are alarmed by the potential difficulties for the global economy due to the introduction of restrictions. Bullish sentiment on the US currency prevails among the major market players, and large investment funds are increasing their positions on USD growth for the second consecutive week. Over the past week, funds have increased greenback purchases by 3%. The strengthening of this trend contributes to the further growth of the US currency, analysts believe.