Investing.com - The US dollar retreated Thursday, with the euro rallying, on raised hopes of an end to the Ukraine-Russia war after U.S. President Donald Trump held talks with the leaders of both of the involved countries.
At 04:25 ET (09:25 GMT), the Dollar Index, which tracks the greenback against a basket of six other currencies, traded 0.2% lower to 107.590, sliding to its lowest since Feb. at 107.49, after rising as high as 108.52 in the previous session.
Dollar retreats on Ukraine peace hopes
President Trump said late Wednesday that he had spoken with Russian President Vladimir Putin and Ukrainian President Volodymyr Zelenskiy about ending the ongoing conflict in Ukraine, saying both men had expressed a desire to reach a peace deal in separate phone calls.
The Kremlin added that Trump and Putin had agreed to meet, while Trump said the two would "probably" speak face-to-face soon in Saudi Arabia.
Meanwhile, China has raised a proposal to hold a summit between Trump and Putin aimed at ending the war in Ukraine, which is now approaching its third anniversary, according to a report in the Wall Street Journal citing people familiar with the matter.
This boost in sentiment has weighed on the safe-haven dollar, which had received a boost earlier Wednesday from the upside surprise in U.S. consumer prices for January, with both headline and core figures topping estimates.
The Russian ruble soared against the dollar, with USD/RUB falling 3.6% to 90.600.
“On a normal day in FX markets, yesterday's much-higher-than-expected U.S. inflation print should have left the dollar stronger across the board and risk assets under pressure,” said analysts at ING, in a note. “That was the case for a few hours before the headlines hit that Trump had had a 90-minute call with Putin to discuss an end to the fighting in Ukraine.”
There is more inflation data to digest later Thursday, with the latest monthly measure of U.S. producer prices set to provide further clarity around inflation in the world's largest economy.
Economists estimate that producer prices increased by 0.3% on a monthly basis in January, up from 0.2% in December. The core measure, stripping out food, energy and trade, is tipped to accelerate to 0.3% month-on-month.
Euro edges higher
In Europe, EUR/USD traded 0.3% higher to 1.0413, rising to a one-week high on the news that Washington was pushing for a peace deal, ending the years-long conflict in Ukraine.
“EUR/USD is c10% below its pre-Ukraine invasion level,” said analysts at Barclays (LON:BARC) in a client note, “while the cost of war has inflated EU government deficits and fuelled stagflation across Europe, resulting in weaker growth and higher bond yields. So any progress towards a pause in the conflict would be seen as likely to ease the fiscal and economic burden on the region.”
Data released earlier Thursday showed that German inflation remained flat year-on-year in January at 2.8%, in line with forecasts.
GBP/USD rose 0.2% to 1.2479, near a one-week high, helped by data showing the U.K. economy unexpectedly grew in the final quarter of last year.
U.K. gross domestic product expanded by 0.1% in the fourth quarter, after failing to grow in the prior quarter, after many economists had expected a small contraction.
On an annual basis, the U.K. economy grew by 1.4%, an improvement from the revised 1.0% growth over the previous three months.
"UK GDP was a bit better than feared in the fourth quarter but the outperformance was solely because of a massive increase in inventories,” ING warned. “Remember these are volatile and don’t tell us much/anything about the underlying economic fundamentals.”
Yen gains after inflation data
In Asia, USD/JPY dropped 0.3% to 153.96, with the Japanese currency strengthening after data showed Japan's annual wholesale inflation jumped to a seven-month high of 4.2% in January and accelerated for the fifth straight month, reinforcing market bets of another rate hike in Japan this year.
USD/CNY traded largely unchanged at 7.3091, with The Wall Street Journal reporting that Beijing had offered to host a peace summit for Russia-Ukraine talks.