EUR/USD pulls back from earlier highs near 1.1400, now under 1.1350 as investors assess geopolitical landscape

• EUR/USD has pulled back from earlier highs near 1.1400 and is back under 1.1350 as geopolitical angst dampens sentiment.
• However, strong Eurozone PMI data, which showed a strong service sector recovery this month, is slowing the decline.
• The pair still trades in the green by about 0.2%.

A continued escalation in violence in Ukraine’s Donbass region and further inflammatory rhetoric from pro-Russia separatist forces located there, coupled with uncertainty over whether this week’s alleged Biden-Putin summit will go ahead has seen risk appetite pare back recently. After topping out in the 1.1390 area shortly after Monday’s European open, EUR/USD has subsequently dropped back below the 1.1350 mark, where it still trades with gains of about 0.2% on the day. Eurozone flash PMI surveys for February were released earlier on Monday and showed a significantly better than expected rebound in service sector sentiment, reflective of falling Omicron infection rates and associated restrictions being eased.

That strong service sector recovery has helped ease the pace of EUR/USD’s pullback from earlier session highs and, near the 1.1350 mark, the pair is trading bang in the middle of its recent 1.1310s-1.1390s range of the past few sessions. FX strategists suspect FX market conditions will remain choppy on Ukraine crisis uncertainty in the coming days. Aside from geopolitics, Fed speak, US flash PMIs, January US Core PCE inflation and any further commentary from ECB policymakers will all be worth a watch as traders assess the timing and pace of Fed/ECB monetary tightening.

With EUR/USD sat close to the middle of 2022’s low-1.1100s to 1.1500 range, the pair’s medium-term technical bias remains neutral. Trading conditions will be unusually quiet this Monday due to US market closures for President’s Day holiday.