Europe assesses the impact of war in Iran
Gabriel Makhlouf reported that the European Central Bank is working to restore 2% inflation.
“Our goal must be to achieve the target inflation of 2%,” said a member of the ECB Governing Council and the head of Ireland’s central bank,
“We will take all necessary actions, to reach this goal, which is why markets interpret it as such,” he added.
Information from Bloomberg indicates that people around Makhlouf share his view and insist that the ECB regularly monitor the economic situation in the euro area.
“Ultimately we will decide based on all available data,” the official said.
Makhlouf also pointed out the “unfavourable” situation in the oil market and rising commodity prices.
“Although fuel prices are particularly important, I am also interested in indirect effects. I want to understand what we observe in terms of impacts on fertilizer and food prices and all other effects,” he said.
According to Luisa de Guindos, the ECB Vice-President, European decision-makers should still consider the impact of the Middle East conflict on EU economies.
“If you look at sentiment indicators, they clearly point to a significant impact of the war—przyp.red.—on economic growth,” she said, adding that an assessment of the US and Iran conflict’s effects will only be possible after some time.
“The problem with this kind of supply shock is that it causes inflation to rise, but at the same time slows economic growth and reduces domestic demand. That reduction in domestic demand can weaken inflationary pressure,” she added.
Guindos claims that the issue of peace in the Middle East may not be resolved in the near future.
“I do, however, believe this approach is correct: the Governing Council will review all new data and take into account the situation in the Middle East,” she summed up, stating that a recession “will not be the baseline scenario” in the forecasts the ECB will produce next month.
Source: Bloomberg.
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Euro and dollar rates on Wednesday, May 27
The euro to zloty rate on Wednesday, May 27 is at PLN.
“Euro, importantly, did not gain significant support yesterday after statements by ECB representatives Philip Lane and Isabel Schnabel, which reinforced markets’ belief in a 25 basis point rate hike on June 11,” the analysts at ING Think said.
“The EUR/USD rate remains stagnant, even though it seems the world is only a few days away from the US and Iran signing a protocol on extending the ceasefire and reopening the Strait of Hormuz,” they added.
Experts say that in the next few weeks the dominant topic will be the Federal Reserve’s monetary policy and the hawkish rhetoric of Fed members.
“It is hard for us to imagine the EUR/USD rate staying above 1,1650/60 under current conditions,” they summarized.
Chart. Euro to zloty (EUR/PLN)
Source: Trading Economics.
The euro to dollar rate reaches USD.
Chart. Euro to dollar (EUR/USD)
Source: Trading Economics.
Also read: Dollar rate before a breakout? Expert: “Capital will flow back to USD”
See also: Dollar rate before a “nervous and dynamic” move, euro waiting for a drop? Expert issued a forecast for USD/PLN and EUR/USD
Source: Bloomberg, ING Think.
