- EUR/USD stalls in the correction from multi-month lows.
- Fed to raise rates this month, underpinning US dollar strength.
- Second round of talks between Ukraine and Russia are due shortly.
EUR/USD is stalling on its advance in later trade on Wall Street as the price moves into what would be expected to act as a resistance area on the hourly chart. At 1.1129, the price is trading near flat on the day after climbing from a low of 1.1057 to a high of 1.1144.
However, the euro is stalling as investors continue to worry about the impact of an escalating conflict in Ukraine on the euro zone's economic prospects. These worries had sent the single currency to a fresh 21-month low of 1.1059, early in the US session.
The US dollar index (DXY), which tracks its performance against six major currencies, was reached a high of 97.83 and this too is its strongest since June 2020. However, overall, financial markets are settling down to some extent and this is seeing Wall Street gain while the benchmark US 10-year Treasury yields edged higher as the second round of talks between Ukraine and Russia are due shortly.
Markets are pinning hopes on the outcome, aware that Vladimir Putin is likely regretful that his invasion has not gone to plan so far as Ukraine puts up a fight, thwarting the fast takeover of the capital. In his State of the Union speech late Tuesday, US President Joe Biden said his Russian counterpart, Vladimir Putin, "badly miscalculated" the response to his invasion of Ukraine.
Meanwhile, the US Federal Reserve will move forward with plans to raise interest rates this month to try to tame inflation, even as the outbreak of war in Ukraine has made the outlook "highly uncertain", Fed Chair Jerome Powell said on Wednesday. The chair said that due to geopolitical concerns he opened the door to the possibility that the rate (rise) will be only 25 basis points versus 50 basis points.
Elsewhere, data on Wednesday showed US private employers hired more workers than expected in February. This falls ahead of the end of the week's Nonfarm payrolls. The data today also showed that the prior months' was revised sharply higher as the labour market recovery gathers steam. Private U.S. employers added 475,000 jobs in February, coming in well above consensus, according to payrolls processor ADP. However, the number is 26% higher than the 378,000 private job gains analysts expect on Friday.
Employment likely continued to recover in February following an unexpectedly strong Jan report—despite the Omicron-led surge in COVID cases, analysts at TD Securities said.
''We expect some of that boost to fizzle, though to still firm job growth pace. Seasonal adjustments were a factor last month and they will likely play a role again in Feb. We expect wage growth to slow to a still strong 0.5% m/m pace.''