EUR/USD to drift lower on another negative shift in risk sentiment

EUR/USD has staged a rebound after having slumped to its weakest level since June 2020 near 1.1100 on Thursday. Is the euro selloff over already? According to FXStreeet’s Eren Sengezer, it is too early to say whether or not the pair is out of the woods yet as investors gear up for another volatile day amid the ongoing Russia-Ukraine war.

ECB President Lagarde will assess the impact of the Russia-Ukraine war on policy

“Several news outlets report that Russia is planning to make a move toward Kyiv. In that case, the euro could face selling pressure and EUR/USD could turn south. Furthermore, the west could introduce additional sanctions if that were to happen and allow safe-haven flows to dominate the markets ahead of the weekend.”

“A relief rally could sweep the markets if Russia were to agree to hold off the attack and look for a diplomatic solution. As it currently stands, this seems to be a very distant possibility.”

“If Lagarde adopts a hawkish tone by noting that they will prioritize battling inflation, the common currency could stay resilient against the dollar. On the other hand, the euro could come under renewed bearish pressure in case the ECB decides to postpone policy normalization to support the economic activity.”