EUR/USD consolidates near weekly lows below 1.1000

• EUR/USD has fallen to around 1.0970 amid de-escalation in the Russia-Ukraine peace talks.
• Moscow may receive further sanctions from the West for civilian deaths in Bucha, Ukraine.
• The USD strengthens amid growing odds of a 50 basis point interest rate hike by the Fed.

The pair EUR/USD has moved lower as escalating tensions between Russia and Ukraine have brought intense selling around the common currency, dragging the pair down about 1.0960. At time of writing, the pair is trading at 1.0969, down -0.04% on the day.

Peace talks between Russia and Ukraine were advancing as officials from both nations discussed elements of the special ceasefire document. A verbal ceasefire was issued, but official confirmation has not yet come.

things were going well, but cornering Russia over the deaths of civilians in Ukraine has raised expectations of more sanctions against Moscow by Western leaders. Additional sanctions on the Kremlin may bring stagflation to Europe. Sanctions on Russia are likely to increase its oil reserves, resulting in a lower supply to Europe and a rise in inflation along with a lower growth rate. Europe, which tackles around 25% of its oil consumption from Russia, will face supply shortages. This has supported the US dollar against the common currency.

Meanwhile, the US Dollar DXY Index is waiting for a trigger that could support it to settle above 99.00. The DXY index has witnessed a strong rise amid rising expectations of a 50 basis point interest rate hike by the Federal Reserve at the monetary policy meeting in May.

Going forward, investors will focus on the US ISM Services PMI to be released in the American session on Tuesday. An increase is expected as the market estimate has risen to 58 points from the previous figure of 56.6. Later in the week all investors’ attention will be focused on the Federal Open Market Committee (FOMC) minutes.