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Market News Bad for the euro! Soaring energy prices dim Europe's economic outlook
Bad for the euro! Soaring energy prices dim Europe's economic outlook
The Russian invasion of Ukraine triggered an economic crisis across Europe. Concerns over supply chains and soaring energy prices have led to rampant inflation across the continent. Despite rising prices to record highs, the European Central Bank has yet to pull interest rates out of a decade of negative territory.
2022-05-17
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The Russian invasion of Ukraine is creating new headwinds that will stifle the European economy. Fears of supply security have sent energy prices soaring after Russia sent troops to Ukraine, which will weigh on households and businesses on the continent.
High input prices are likely to weigh on production, while the rising cost of living will push consumption below initial expectations .
Weak economic activity forecasts have led the European Commission to cut its EU growth forecast for this year to 2.7% from 4% a few months ago .
EU Economic Commissioner Paolo Gentiloni said: “Russia’s invasion of Ukraine is causing untold pain and devastation, but it is also dragging on Europe’s economic recovery. The war has caused energy prices to soar and supply chains to be further disrupted, so inflation will remain in place for longer. at a high level ."
The European Commission now expects inflation to peak at 6.9% in the second quarter of this year , before falling back.
Despite rising prices to record highs, the European Central Bank has yet to pull interest rates out of a decade of negative territory.
In December, the Bank of England became the first major monetary policy agency to raise interest rates, while the Fed raised borrowing costs by 50 basis points at its last meeting for the first time since 2000.
Inflation in the UK was 7%, the highest in 30 years, while across the Atlantic it was 8.3%, the highest in 40 years.
Europe's heavy reliance on Russia for gas means that rising gas prices and supply disruptions caused by the war will make it difficult for companies to maintain normal production levels .
Germany, the economic powerhouse of the European continent, the industrial sector accounts for a large proportion of its national output. Energy shortages and rising gas prices could dampen the country's economy .
The IMK Institute estimates that a sudden energy embargo on Russia in order to increase sanctions could hit the European economy by 114 billion euros to 286 billion euros, equivalent to about 3% to 8% of GDP .
Berlin has opposed a blanket ban on Russian gas, but supports an oil embargo by the end of the year.
Similar to the economies of other prosperous countries, Europe's labor market is in good shape. "The unemployment rate is expected to fall further, to 6.7% this year and 6.5% in 2023," the European Commission said.
EUR/USD daily chart
GMT+8 May 17 11:43 EUR/USD at 1.0442
High input prices are likely to weigh on production, while the rising cost of living will push consumption below initial expectations .
Weak economic activity forecasts have led the European Commission to cut its EU growth forecast for this year to 2.7% from 4% a few months ago .
EU Economic Commissioner Paolo Gentiloni said: “Russia’s invasion of Ukraine is causing untold pain and devastation, but it is also dragging on Europe’s economic recovery. The war has caused energy prices to soar and supply chains to be further disrupted, so inflation will remain in place for longer. at a high level ."
The European Commission now expects inflation to peak at 6.9% in the second quarter of this year , before falling back.
Despite rising prices to record highs, the European Central Bank has yet to pull interest rates out of a decade of negative territory.
In December, the Bank of England became the first major monetary policy agency to raise interest rates, while the Fed raised borrowing costs by 50 basis points at its last meeting for the first time since 2000.
Inflation in the UK was 7%, the highest in 30 years, while across the Atlantic it was 8.3%, the highest in 40 years.
Europe's heavy reliance on Russia for gas means that rising gas prices and supply disruptions caused by the war will make it difficult for companies to maintain normal production levels .
Germany, the economic powerhouse of the European continent, the industrial sector accounts for a large proportion of its national output. Energy shortages and rising gas prices could dampen the country's economy .
The IMK Institute estimates that a sudden energy embargo on Russia in order to increase sanctions could hit the European economy by 114 billion euros to 286 billion euros, equivalent to about 3% to 8% of GDP .
Berlin has opposed a blanket ban on Russian gas, but supports an oil embargo by the end of the year.
Similar to the economies of other prosperous countries, Europe's labor market is in good shape. "The unemployment rate is expected to fall further, to 6.7% this year and 6.5% in 2023," the European Commission said.
EUR/USD daily chart
GMT+8 May 17 11:43 EUR/USD at 1.0442
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