The US dollar fell sharply on Thursday, while the euro rose on hopes of a peace deal in Ukraine. This came after US President Donald Trump held phone conversations with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelensky. This coincided with a decline in the US dollar index, which tracks the performance of the US currency against a basket of other currencies.
US Dollar Index Decline
By 04:25 ET (09:25 GMT), the US dollar index was down 0.2% at 107.590. This brought the index to its lowest level since February 2025, after rising to 108.52 in the previous session.
The Role of Peace Talks in Ukraine
In his remarks, President Trump announced that he had spoken with Presidents Putin and Zelensky regarding ending the conflict in Ukraine. Trump confirmed that the phone conversations between the two leaders were positive, and indicated the possibility of a face-to-face meeting between them in Saudi Arabia soon. For its part, China proposed holding a summit between Trump and Putin with the aim of ending the ongoing war in Ukraine.
This progress in the talks helped lift the sentiment of financial markets, which directly affected the dollar as a safe haven. This was preceded by an economic surprise in the United States, represented by the inflation data for January, which showed price increases that exceeded expectations.
The rise of the Russian ruble
In the same context, the Russian ruble witnessed a significant rise against the US dollar, as the dollar/Russian ruble pair fell by 3.6% to the level of 90.600. According to analysts at ING Bank, the rise in consumer prices in the United States was expected to strengthen the dollar, but the news of Trump’s talks with Russian and Ukrainian leaders turned the balance of the markets.
Inflation in the United States and its effects on the dollar
In the US, more economic data is expected later today, with the Producer Price Index (PPI) figures expected. Experts expect the data to show a 0.3% increase in producer prices on a monthly basis for January, compared to a 0.2% increase in December.
Euro Rebound
In Europe, the euro rose against the dollar, with the EUR/USD pair rising 0.3% to 1.0413, its highest level during the week. This rise was supported by news showing progress in peace negotiations between Russia and Ukraine.
Analysts pointed out that the euro has lost nearly 10% of its value against the dollar since the start of the war in Ukraine. However, any progress in the talks could help ease the economic pressure on Europe.
UK Economy
In the UK, the pound sterling rose against the US dollar, with the GBP/USD pair reaching 1.2479, which is close to its highest level in a week. The rise is attributed to data showing unexpected growth in the British economy during the last quarter of 2024. The UK GDP rose by 0.1% after a slowdown in the third quarter.
US Dollar Forecast
Recent inflation data appeared to pose a challenge to the US Federal Reserve’s interest rate policy. The core consumer price index rose by 0.4% on a monthly basis, exceeding expectations of 0.3%. This reflects continued inflationary pressures.
Jerome Powell, Chairman of the Federal Reserve, pointed out the importance of assessing inflation over the long term and not reacting to a single report. He also stressed that the central bank is closely monitoring inflation data, focusing on personal consumption expenditures as a key tool for monitoring economic conditions.
US Dollar Price Forecast
According to many analysts, strong inflation data could influence the Federal Reserve’s monetary policy. The rise in the core CPI indicates continued inflationary pressures, which could hinder any moves towards lowering interest rates.
Oil and Global Inflation
On the other hand, crude oil inventories in the United States rose by 4.1 million barrels, which exceeded expectations for an increase of 2.4 million barrels. This increase in inventories could contribute to increasing inflationary pressures, especially with the impact of energy prices on the cost of living.
Technical Analysis of the US Dollar Pair
The US Dollar Index appears to be in a decline, as it is trading at the level of 107.519. Despite the resistance at 108.078, technical indicators suggest that the decline may continue. In case the index falls below the level of 107.301, the downtrend may accelerate.
Technical Analysis of the GBP/USD Pair
The GBP/USD pair is currently trading at the level of 1.24962. With the pair remaining above the pivot point of 1.24625, the outlook remains positive. A break of the resistance level of 1.25447 could push prices towards the level of 1.26010. However, in case of breaking the support level of 1.24079, the pair could witness a decline towards the level of 1.23544.
EUR/USD Technical Analysis
The EUR/USD pair is trading at the level of 1.04377. This pair faces resistance at 1.04790, and if it succeeds in breaking this level, it could witness an increase towards 1.05325. However, in case the pair declines below the level of 1.03790, it could lead to further selling pressure.
The latest developments in the peace talks between Russia and Ukraine could have positive implications for financial markets. The decline of the US dollar comes at a sensitive time with the persistence of inflationary pressures in the United States.
