Jump to content

Russia-Ukraine war puts ECB policy move on hold

Recommended Posts

The ECB finds itself in a complicated position ahead of its meeting, as inflation rises and the war in Ukraine rumbles on.

BG_vladamir_putin_russia_234234.jpgSource: Bloomberg
 Chris Beauchamp | Chief Market Analyst, London | Publication date: Tuesday 08 March 2022 

Two weeks ago, the outlook for the European Central Bank (ECB) meeting was tough, but at least the path was relatively straightforward. A rate hike later in the year was expected, but for now policy would remain unchanged, although the stress would be laid on an expected tightening of policy.

Russian president, Vladimir Putin’s invasion of Ukraine has upended those assumptions. Oil prices have surged, as have a host of other commodity prices. This will drive consumer price inflation (CPI) yet higher, putting major pressure on the ECB to act, just as the economy begins to slow. The possibility of stagflation looms.

Recent speeches and forecasts have been made rapidly obsolete, and with so much uncertainty surrounding the war and the impact on the eurozone economy, the bank will have to give a wide range of potential outcomes. The factors driving higher prices are broadly outside the ability of the ECB to affect, and will continue to rise regardless of what the ECB does.

A cautious policy is likely to be the result, with the Governing Council looking to end the Pandemic Emergency Purchase Programme but leave the rest of the quantitative easing (QE) programme intact for now. It may also look to dial back speculation about when the first rate hike may arrive. Should the situation improve then a different policy can emerge, but for now caution is warranted.

EUR/USD outlook

A downturn in risk appetite has driven EUR/USD down further, after already dropping throughout most of 2021. Continued uncertainty may yet drive the pair back towards $1.0650, the 2020 lows. If the ECB manages to give a more hawkish outlook, then the pair may bounce, recovering $1.10. 

EURUSD_080322.pngSource: ProRealTime
Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 05/06/23 21:20
  • Posts

    • Tech Stock Market Report: Apple (AAPL),Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA), Microsoft MSFT, Meta Platforms, Netflix (NFLX), Alphabet GOOGL  Stock Market Summary: Tech stocks remain in bullish trend.  Elliott Wave Analysis: APPL is in Wave (a) of an (a) (b) (c) Wave iv) correction, this will affect ETFs and the Nasdaq 100. This correction should be completed at the end of the next trading session. The tech stocks in this video are fine in their bullish trend structures. Trading Strategy: Longer term traders can simply hold as the main trend structure as a bullish trend is in place. Video Chapters 00:00 Apple (AAPL) 09:35 Amazon (AMZN) 10:54 NVIDIA (NVDA) 15:44 Meta Platforms (META) 17:41 Netflix (NFLX)  19:20 Alphabet (GOOGL) 21:33 Microsoft (MSFT) 25:16 Tesla (TSLA) 31:35 End Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge com   
    • Look Ahead to 6/6/23: RBA interest rate decision; UK retail sales; British American Tobacco Australia’s central bank is likely to keep rates at 3.85% in June, but may raise again soon as inflation remains uncomfortably high. More data is likely to show cost of living pressures continue to weigh on the British consumer. Plus, watch out for consumption trends and earnings from British American Tobacco. Angeline Ong | Presenter, Analyst and Content Editor, London | Publication date: Monday 05 June 2023           
    • We would like to go short silver for technical reasons and do so at $23.58 with a stop-loss at $24.03 and a downside target at $22.15. Axel Rudolph FSTA | Senior Financial Analyst, London | Publication date: Monday 05 June 2023        
  • Create New...