EUR/USD sticks around 1.1200 ahead of further developments in the Russia-Ukraine war

• EUR/USD is hovering around 1.1200 ahead of fresh impetus from the Russia-Ukraine tensions.
• Besides Russia, Europe looks to be the most impacted economy from the sanctions.
• Tuesday’s Manufacturing PMI from the US and Europe will remain under the radar.

The EUR/USD is trading lacklustre in the early Asian session on Tuesday as investors are waiting for fresh triggers from Russia’s invasion of Ukraine. The major has witnessed a principal jump on Monday after a bearish opening gap as the risk-off impulse kicks in after the peace talks between Moscow and Kyiv.

The geopolitical tensions between the Kremlin and Ukraine have impacted the economics of Europe. The European economy seems moving into recession amid the sanctions on Russia and likely subdued demand. The latter has been cut off from the SWIFT international banking system, which has caused disruption to its oil exports.

It is worth noting that Europe augments its 40% of natural gas demand from Russia only and more than a quarter of the oil imports. Therefore, the largest impact of imposing sanctions on Russia will be faced by Europe.

The sanctions imposed on Russia are likely to worsen the already soaring inflation in Europe. Therefore, the European Central Bank (ECB) will remain in dilemma whether to hike interest rates to combat the rising inflation or to deploy a dovish stance to counter the expected recession.

The US dollar index (DXY) seems to build some grounds near 96.75 till further updates from the Russia-Ukraine war.

Apart from the headlines of the Russia-Ukraine war, investors will focus on the Manufacturing Purchasing Managers Index (PMI) data by the Institute for Supply Management (ISM) and Euro Manufacturing Purchasing Managers Index (PMI) from the HIS Markit, which are due on Tuesday.