ECB: Euro area fiscal aid boosts growth and lowers inflation in 2022

Dhwani Mehta FXStreet

In a pre-release of its economic bulletin published on Tuesday, the European Central Bank (ECB) revealed that the fiscal support provided to the euro area economies amidst the Russia-Ukraine war is boosting the bloc’s GDP while temporarily lowering inflation, per Bloomberg.

Key takeaways

“The total stimulus measures in response to the war are estimated to have an impact of almost 0.4 percentage points on overall growth and a limited impact of just over 0.1 percentage point on inflation.”

“Efforts should be made to increasingly target energy-related measures to vulnerable segments of the population.”

Market reaction

At the time of writing, EUR/USD is off the 1.0215 low but remains 0.24% lower on the day at 1.0234. The pair bears the brunt of risk-averse market conditions, thanks to the escalating US-China tensions over Nancy Pelosi’s visit to Taiwan.

Meanwhile, EUR bears retain control, as money markets now suggest the ECB will be forced to stop before it reaches 100 basis points, compared with bets for more than 200 basis points overall as recently as July 21. The change in the market’s expectations for potential ECB tightening is based on the renewed recession fears and persisting European gas crisis.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

EUR/USD appears supported by the 200-day SMA, for now

Following an early pullback to multi-week lows near 1.1670, EUR/USD now manages to reclaim the 1.1700 region as the NA session draws to a close on Monday. The steep retracement in spot follows the equally strong move higher in the US Dollar, as investors continue to assess the geopolitical landscape in the wake of the US and Israel attacks on Iran.

GBP/USD hits new yearly lows near 1.3300

GBP/USD adds to the recent bearish tone, approaching to the key 1.3300 support to reach fresh YTD troughs against the backdrop of the robust performance of the US Dollar. Indeed, Cable’s decline comes amid the firm demand for the safe-haven space in the wake of the US and Israel attacks to Iran.

Gold eases some ground, approaches $5,300

Gold now surrenders part of the earlier advance, reshifting its attenton to the $5,300 zone per troy ounce at the beginning of the week. Indeed, the yellow metal’s firm performance appears propped up by incresing geopolitical jitters in the Middle East, which at the same time fuels the demand for the safe-haven space.