• The euro is struggling amid the Ukraine war and rising commodity prices.

• Economists are hammering home the Eurozone's growth projections ahead of the ECB meeting next week and talking about stagflation.

EUR/USD was at one time on the brink of surrender when it dropped below the 1.0900 mark for the first-time in almost two years, but it has since recovered some control during US trading hours. EUR/USD trades at 1.0915, but still has daily losses of around 1.35%. This is the worst performance in a daily trading session since March 2020. This puts the pair at risk of a weekly decline of more than 3.0%, which is the worst performance since March 2020.

G10's standout underperformer has been the euro. Market participants are now questioning their economic forecasts and rethinking ECB policy calls. Some now call for stagflation. This is an economic condition in which inflation rates increases while growth rates slip into negative territory. This presents a serious dilemma for the ECB. Treat near-term inflation by either tightening the screws or allowing inflation to run, and boost growth by leaving out the accommodation.

The weakness of the Euro suggests that traders favor the ECB choosing to choose the latter. The US Dollar is now much more appealing, thanks to Friday's robust US labour market report, and other decent economic data this semaine, which support the position of Fed Chair Jerome Powell, who suggested a 25bps rate increase in March and several further increases thereafter. There is still the possibility of inflation taming the rate rises, and the option to accelerate the rate of interest rate increases if necessary. This is before we even consider the fact that the dollar is seen as a safer haven than the euro, and that the economic impact of the Ukraine conflict on the US will be much less.

Geopolitics and related movements within the commodity space will continue to be key drivers for EUR/USD. Further energy price upside presents downside risks to EUR/USD (and possibly a drop back below 1.0900). On Thursday, the US Consumer Price Inflation data for February will be released. The ECB's policy announcement on Thursday (including economic forecasts) will also be announced.