With the successes of the Ukrainian military, the sentiment in the markets improved a bit at the beginning of the week. However, Antje Praefcke, a foreign exchange and emerging markets analyst at Commerzbank, is skeptical. The worst may be yet to come.
The more the ECB does in advance, the less it could do at a later stage
“I am cautious about the ECB and the positive reactions from the euro in response to the hawks’ comments. The further the ECB goes, i.e. raising the key short-term rate, the less it could do at a later stage. Especially if the economy deteriorates significantly in winter as a result of an energy crisis. In addition, the ECB will have to first fulfill what the market is valuing.”
“The worst (in the form of a harsh winter with power shortages and a recession that will make the ECB more cautious again) may be yet to come. Although, of course, I would be relieved if we could avoid it.”
Source: Fx Street
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