Forex Today: Markets quiet down for now, prepare for another turbulent day

Here is what you need to know on Friday, February 25:

Safe-haven flows dominated financial markets for the majority of the day on Thursday and the US Dollar Index (DXY) surged to its highest level since June 2020 at 97.73 before retreating in the late American session. Markets stay relatively quiet early Friday and the DXY extends its corrective slide as investors brace for another turbulent day. The European Commission will release the February sentiment report and the US Bureau of Economic Analysis' Personal Consumption Expenditures Price Index data will be featured in the US economic docket later in the day. Developments surrounding the Russia-Ukraine war, however, are likely to remain as the primary market driver ahead of the weekend.

Following Russia's decision to launch an attack on Ukraine, western nations announced a series of sanctions on Thursday. The EU, the UK and the US refrained from cutting Russia off from the SWIFT system while noting that option was still on the table. Furthermore, the Russian energy sector was also largely left out of sanctions, easing worries over the negative impact of sanctions on the global economy and inflation. Nevertheless, "today will be the hardest day," an adviser for the Ukrainian government said earlier in the day and noted that Russia was planning to use tanks to break through Kyiv. Additionally, Ukrainian President Zelenskyy said sanctions imposed on Russia was not enough. 

Heading into the European session, the DXY was down 0.2% on the day at 96.85, the 10-year US Treasury bond yield was little changed at 1.96% and the barrel of West Texas Intermediate was rising 1.75% at 94.60. US stock index futures, meanwhile, were posting small daily losses, pointing to a cautious market mood.

Markets quake on Russian invasion of Ukraine but quickly discover Realpolitik.

EUR/USD is staging a rebound and trading in the positive territory above 1.1200 after losing more than 200 pips and posting one of its largest one-day declines in several months on Thursday.

GBP/USD fell to its lowest level since late December at 1.3271 on Thursday but managed to erase a portion of its losses. The pair was last seen rising 0.4% on the day at 1.3426.

Gold surged to its strongest level since September 2020 at $1,974 on Thursday but made a dramatic U-turn in the second half of the day to close flat a little above $1,900. XAU/USD has regained its bullish momentum early Friday and started to edge higher toward $1,920.

Although the JPY managed to outperform its risk-sensitive rivals, such as the EUR, GBP and AUD, on Thursday, USD/JPY gained traction on broad-based USD strength and climbed to the 115.50 area. The pair consolidates its gains but holds above 115.00.

Bitcoin fell below $35,000 but capitalized on the risk-reversal in the late American session on Thursday and closed above $38,000. BTC/USD is posting modest gains early Friday but stays below $40,000 for the time being. Ethereum fluctuates in a relatively tight range above $2,600 after recovering from the multi-week low it touched at $2,300 on Thursday.