Euro weakens as Biden is set to unveil new sanction plans
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London
THE euro weakened against the US dollar on Wednesday (Mar 24) amid another sharp increase in oil and natural gas prices and while investors waited for US President Joe Biden to unveil new sanctions against Russia during his trip to Europe.
Biden, who's heading to Brussels for talks with Nato (North Atlantic Treaty Organization) and European leaders, will push Europe to reduce its reliance on Russian oil and gas, and could announce new sanctions on members of the Russian parliament over Moscow's invasion of Ukraine.
The European Union currently seems unlikely to agree to a ban on Russian oil which would also weigh on the euro.
"An embargo on Russian oil would increase the likelihood of Russia turning off the gas tap to Europe in return," Ulrich Leuchtmann, head of FX research at Commerzbank, wrote, saying such a scenario could throw Europe into recession.
Derek Halpenny, MUFG's head of research, noted that the disruption of Russian and Kazakh crude exports via the Caspian Pipeline Consortium (CPC) was adding to worries about energy markets.
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"The primary contagion from a macro picture comes from energy prices and they are moving in a direction which is not positive", he commented, adding that the pressure on the common currency from the US central bank's aggressive stance on inflation was also resuming after a brief respite.
Federal Reserve chair Jerome Powell has opened the door for raising interest rates by more than 25 basis points at upcoming policy meetings, a stance which sent U.S. benchmark 10-year yields sharply higher.
The euro opened broadly flat but gradually lost ground against the greenback and fell about 0.4 per cent below the US$1.10 bar, while the continent's equity markets also drifted into negative territory.
At 1220 GMT, the US dollar index, which measures the greenback against six major peers, was up 0.25 per cent.
Sterling eased 0.44 per cent at US$1.3204 after touching its highest against the US dollar in nearly three weeks. REUTERS
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