The euro is recording modest gains in relation to the dollar
The euro is recording some modest gains in relation to the US dollar during early Wednesday trading, after losing almost 1% during the previous sessions. The war in Ukraine continues to weigh on the sentiment of investors and cast a shadow over the single currency, affecting the confidence of economic agents and reducing the scope of action for the ECB. Inflation, exacerbated by the energy crisis, continues to rise across the continent, while the war reduces the prospects for economic growth. Against this background the ECB must tread carefully, dealing with rising prices while avoid triggering a recession due to an untimely withdrawal of stimulus – a scenario that doesn’t offer much support to the single currency, especially at a time when the Federal Reserve is decisively leaning towards tighter policies.
Gold prices are flat during early European trading, following Tuesday’s rise which reached the highest level since mid-March. Gold’s gains came as US yields eased down, following the release of US inflation data, which despite reaching a fresh 40-year high, also gave signs that it may have peaked. The markets have been pricing-in the Fed’s new hawkish stance and the prospect of inflation stabilization will reduce the scope for further dollar gains, a scenario that will be positive for gold due to the inverted correlation with the greenback. As the war in Ukraine approaches a new stage, with a Russian offensive expected in the east, gold’s haven appeal could once again increase, creating scope for further gains.
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