Euro falls to more than 2-week low after Trump, Zelensky meeting

Euro Drops After Zelensky and Trump Meeting Falters

Ukraine and US Fail to Reach Peace Deal, Markets Concerned

The euro dropped on Friday (Feb 28) after a meeting between Ukrainian President Volodymyr Zelensky and US President Donald Trump went up in flames, dashing hopes any peace deal could be reached soon in the war with Russia.

Trump and Zelensky Trade Barbs

Trump and Zelensky traded verbal barbs during a meeting that was designed to help Ukraine convince the US to not side with Russian President Vladimir Putin, who ordered the invasion of Ukraine three years ago.

No Deal Reached

Zelensky left the White House early following the meeting, without signing a deal between Ukraine and the US over the joint development of natural resources.

Markets React

"A big driving force of markets now is uncertainty on a lot of different levels, and this is just another part of that," said Jack Mcintyre, portfolio manager at Brandywine Global in Philadelphia. "It looked like we were moving towards progress on a peace deal or a ceasefire between Russia and Ukraine and maybe now that gets to come on hold, so you have to price in a little bit more uncertainty."

Euro Slumps

The euro slumped after the meeting and was last down 0.29 per cent at US$1.0367 after dropping to US$1.0359, its lowest since Feb 12. After falling for several months from a more than one-year high hit in September, the single currency has shown signs of stabilizing, partly on hopes a peace deal could be reached.

US Dollar Edges Lower

The US dollar initially edged lower on Friday after a reading on inflation was largely as anticipated by investors while consumer spending unexpectedly fell.

PCE Price Index and Consumer Spending

The Personal Consumption Expenditures (PCE) price index increased 0.3 per cent in January, in line with expectations of economists polled by Reuters, after advancing by an unrevised 0.3 per cent in December. In the 12 months through January, prices rose 2.5 per cent after increasing 2.6 per cent in December. Consumer spending, which accounts for more than two-thirds of US economic activity, dropped 0.2 per cent last month after an upwardly revised 0.8 per cent increase in December.

Fed Rate Cut Expectations

Expectations the Federal Reserve will cut rates by at least 25 basis points (bps) at its June meeting edged up after the data, with markets pricing in a 79.1 per cent chance of a cut, up from nearly 70 per cent in the prior session, according to CME’s FedWatch Tool.

Conclusion

The US dollar and euro have been volatile in recent weeks, with the greenback initially edging lower on Friday after a reading on inflation was largely as anticipated by investors while consumer spending unexpectedly fell. The euro, on the other hand, slumped after a meeting between Zelensky and Trump failed to produce a peace deal, leaving markets uncertain about the future.

FAQs

Q: What happened in the meeting between Zelensky and Trump?
A: The meeting ended early without a deal, with Trump and Zelensky trading verbal barbs.

Q: What was the outcome of the PCE price index and consumer spending?
A: The PCE price index increased 0.3 per cent in January, in line with expectations, while consumer spending unexpectedly fell 0.2 per cent.

Q: What is the current state of the US dollar?
A: The dollar initially edged lower on Friday after the data, but has been volatile in recent weeks.

Q: What is the current state of the euro?
A: The euro slumped after the meeting between Zelensky and Trump, its lowest since Feb 12.