Euro up as Russian gas returns, stocks waver ahead of ECB decision

Agence France-Presse

Posted at Jul 21 2022 07:50 PM

PARIS - The euro gained ground against the dollar on Thursday after Russia resumed gas supplies to Europe but stock markets were twitchy ahead of a European Central Bank policy meeting, where the guardian of the euro is expected to announce its first rate hike in over a decade. 

At around half-way through the session, London's FTSE 100 and Frankfurt's DAX index were both down by nearly 0.5 percent, while the Paris CAC 40 trod water. In Italy, where the Prime Minister Mario Draghi has quit, the FTSE MIB shed nearly two percent.

"The euro is on the front foot... claiming back some of the previous session's losses to the dollar," said ActivTrades analyst, Ricardo Evangelista. 

"Russia resumed the supply of gas to Europe through the Nord Stream pipeline, in a move that is positive for the single currency. However, the sigh of relief from euro bulls was limited, as later today the ECB is expected to announce its first rate hike in years." 

Russia on Thursday restored critical gas supplies to Europe through Germany via the Nord Stream pipeline after 10 days of maintenance, but uncertainty lingered whether the Kremlin would still trigger an energy crisis on the continent this winter. 


ECB watchers are divided over the size of the anticipated rate hike. Until recently, most market players had been betting on a quarter-point increase. 

However, "a larger hike would make sense in the current scenario of high inflation, but could also increase doubts over the growth prospects of the eurozone, and intensify the risk of fragmentation in the periphery," ActivTrades analyst Evangelista said. analyst Neil Wilson said there has been "some chatter about a double-hit 50-basis-point hike, which has seen markets move swiftly to price in more aggressive tightening, lifting the euro from its multi-year lows.

"However, I believe it is not in the ECB's nature to go off-beam and rip up the guidance it issued just weeks ago."

Complicating the situation was the news of Draghi's resignation and the ensuing political instability in Italy it will entail.

"Italy's political turmoil will stay the hand of the ECB," said Wilson at 

"It seems all too apposite that Mario Draghi, the man who 'saved' the euro, is going to fall on his sword the very day the ECB raises rates for the first time in more than a decade, and that the economic problems in Italy that his policies papered over as ECB chief have not been resolved."

On the commodities markets, oil prices extended their losses -- with WTI below $100 -- after data showed US stockpiles rose more than expected last week as Americans opted not to pay for expensive petrol.

The figures come despite being at the height of the high-demand summer driving season.