Peter Nurse

Investing.com – The U.S. dollar edged higher Thursday, while the euro handed back some of the previous session’s hefty gains ahead of high-level talks between Ukraine and Russia as well as the latest European Central Bank meeting. 

The Dollar Index (which tracks the greenback in relation to a basket six currencies) traded 0.1% lower at 98.015 ET (2:55 GMT).

fell 0.1% to 1.1065, maintaining most of Wednesday’s 1.6% gain, its largest single-day jump higher since June 2016, after the announcement of talks between the foreign ministers of Ukraine and Russia as well as easing oil prices boosted risk sentiment.

Russian foreign minister Sergei Lavrov will meet his Ukrainian counterpart Dmytro Kuneba in Turkey on Thursday. This is the first get-together between the two since Russia’s invasion, raising hopes that a ceasefire can be agreed even though Ukraine’s foreign minister warned that his expectations were low.

“Fanning those hopes seem to be comments from President Zelenskiy that Ukraine no longer seeks NATO membership. At the same time, it seems that Russia may no longer be seeking regime change in Kyiv,” said analysts at ING, in a note. “This seems to be building expectations that some kind of deal can be achieved.”

The sharp drop in crude oil prices on Wednesday helped the euro rebound from the recent losses. Brent and WTI fell over 12% after major producers indicated that they would increase supplies to compensate for disruptions caused Russia by Western sanctions.

Common currency dropped to 1.0804, down 22 months from its previous week low. This was due to the negative impact of Russia’s invasion in Ukraine and associated sanctions on crude oil, increasing fears about stagflation.

Also on the agenda, Thursday is the latest meeting of the , with investors looking at how Russia’s invasion of Ukraine will impact monetary policy, given the policymakers had signaled in February an exit strategy to its emergency bond purchases, opening the way for an interest rate hike late this year.

U.S. government will issue its February figures later today. Expect another increase in this figure, as the average annual figure is now 7.9%. This compares to 7.5% last month. 

It is expected that the Federal Reserve will increase interest rates by one-quarter of a point when it meets next week.

The Elsewhere index traded 0.1% higher at 115.94 after jumping on Wednesday. It gained 0.1% or 1.3184. While the risk-sensitive rose 0.3% to 0.73340

With the West imposing sanctions against Russia in response to its invasion, the ruble was 0.4% lower at 120.4700.

Russian officials took many steps to stabilize its economy and protect hard currency availability. However, the country is heading for an inflation peak that could be the worst since World War II, likely to the detriment its currency.