The euro is likely to fall under pressure this week as on Sunday, Ukraine prepared for a Russian invasion and investors flocked to more liquid currencies like the Swiss franc.
The common currency traded at $1.3787 at 7:30 GMT on Monday morning as all eyes shifted to the quickly escalating situation in Ukraine.
On Sunday evening, Reuters reported that Russian President Vladimir Putin declared his right to protect Russian citizens in Ukraine and Russian interests using military force, which Ukrainian leaders have interpreted as a declaration of war. The decision sent a powerful message to the West, which had previously warned Putin not to intervene.
Kiev has begun to mobilize its troops, however the Ukrainian military is dwarfed by Russian troops which are much larger and better equipped. The Ukrainian Defense Ministry has called for reserves, which includes all men up to the age of 40 within the country, but even with the extra manpower the nation will lack guns and supplies to equip them.
Putin's decision has enraged the US officials, who are calling for economic sanctions designed to isolate Russia. The euro will likely face pressure as the situation plays out since the US alone will not be able to make a dent in the Russian economy. In order to have an impact, American sanctions will need to be accompanied by major eurozone nations, which are dependent on Russia for gas.
Meanwhile, several Western leaders including Barack Obama have canceled their trips to Sochi for a G8 summit, and ambassadors have been recalled from attending the Paralympics.
Moving forward all eyes will be on Ukraine for further developments. Ukrainian officials have said they will ask the United Nations for military support if Russia progresses with further military intervention.
BY Laura Brodbeck