SINGAPORE- The euro was pinned near a 22-month low on Tuesday as war in Ukraine has darkened Europe’s economic outlook, while commodity currencies took a breather in their weeks-long rally.
The euro was doing its best to bounce after six straight sessions of selling, but at $1.0855, it was not terribly far from Monday’s trough of $1.0806.
The common currency is down 4 percent on the dollar since Russia launched what it calls a “special military operation” in Ukraine where fighting is showing no signs of abating. It flirted with parity on the Swiss franc on Monday for the first time in seven years.
Russia-Ukraine Peace talks have made scant progress and though Germany’s opposition to a ban on Russian energy imports knocked oil futures from Monday’s 14-year peak, analysts expect the supply shock to hurt European growth.
“Markets could continue to price the risk of a disruption to Russian energy exports and downgrade the European growth outlook,” said Commonwealth Bank of Australia strategist Carol Kong.
“As such, we expect the euro to remain under pressure. There is a reasonable chance euro/dollar tests the pandemic low of $1.0688 this month.”
The European Central Bank meets on Thursday with the specter of stagflation prompting economists to figure that policymakers might delay rate hikes until late in the year.
Besides commodities’ parabolic rally the conflict and subsequent sanctions have crushed Russian assets, with the rouble sliding to a record low of 160 to the dollar in erratic offshore trade on Monday.
