EURUSD has commenced the week with an accelerated weakness. Shedding off further to the downside ahead of the new sanctions placed on Russia by the Western powers as a punishment for invading Ukraine. The United States Acts in Tandem with Partners and Allies to Maximize Consequences for Russia. In Show of Unity Against Invasion of a Sovereign State, the United States had recently placed a partial ban on Russia’s use of the SWIFT bank correspondence system. This means the Russian banks and citizens can no longer send and receive money across the globe. Thus Top Ten Russian Financial Institutions are now Under U.S. Restrictions and can no longer function globally. This ban was further accompanied by a far greater one involving a threat by the U.S. to freeze the reserve assets of the Central Bank of Russia, costing a total of $650 billion.
Effects of the Ban
These actions dramatically disrupt Russia’s access to the global financial system, disabling the CBR from defending the free-falling Ruble as well as cutting off the government from cross-border purchases and financing. Also, Russia’s credit rating was promptly cut to junk.
Similarly, the bans placed on Russia targets two of Russia’s Largest Financial Institutions, such as Public Joint Stock Company Sberbank of Russia (Sberbank) and VTB Bank Public Joint Stock Company (VTB Bank). This ban no doubt drastically alters their fundamental ability to operate.
Remarkably, Russian financial institutions have been known to conduct over $45 billion worth of foreign exchange transactions globally, of which 80 percent are in U.S. dollars. The vast majority of those transactions will now be disrupted.
These actions undoubtedly have been designed to weaken the Russian economy, stifling their significant economic engagement and isolating Russia from all international transactions.
EURUSD Forecast
EURUSD retested its annual lows last week following the increasing unrest between Russia and Ukraine and recent severe sanctions. The pair has started the week seeking to maintain the support at $1.11770, but this was hardly possible as it already broke below it. Euro will likely continue on this downward trend for the next few days.
On the other hand, the bears might have to concede to the bulls any time soon, wildly, if the recently proposed peaceful talks between Russia and Ukraine succeed this week in Belarus. Of course, the Russian president had set its military at the highest offensive attack at any slight harsh utterance and seizure from Ukraine during this meeting.
