The Euro could suffer if tensions between Russia and Ukraine escalate and destabilize economic dynamics and European politics. Local capital markets are likely to sell; However, specific promotions may be added. On the other hand, Swiss anti-risk may increase against the background of instability; As it happens in times of European political turbulence. In case of imposing economic sanctions against Russia; Crude oil and natural gas prices may reach a wave of politically induced supply disruptions. This, in turn, will reinforce what a growing prospect against the backdrop of revived global demand for these fixed assets was.
The Nord Stream 2 pipeline remains a political and economic bridge between the United States and its European allies. There are concerns for Washington that it could give Moscow inappropriate leverage over the economy of Germany and the region as a whole. As a result, it could soften Europe’s foreign policy toward Russia and weaken US efforts. On the other hand, Europe and Germany continue to see rising energy prices. If approved, the Nord Stream 2 pipeline will supply Germany with 55 billion cubic meters of gas annually. This will reduce costs against the background of a broadly inflationary trend, which creates the basis for tensions between the US, Russia, and Europe.
According to the Congressional Research Service, “before the completion of Nord Stream 1,” about 80% of Russia’s natural gas exports to Europe were in transit through Ukraine. In 2019, about 45% of these exports were transited through Ukraine.
Euro and Political Risks
Until the pipeline completes, a certificate of operation has not yet been issued. That said, analysts expect regulators to approve the license from March to July 2022. Washington openly stated that it could impose sanctions on Russia if Moscow sent troops to Ukraine’s borders. US sanctions could provoke retaliation from Russia in the form of limited oil and gas supplies. This will potentially lead to increased energy prices and the fire of inflation. According to the managing director of ClearView Energy Partners, Russia’s vast resources mean it can dig a giant hole in its supply; Then the West can lock.
As for the Euro, the conflict between the US and Russia over Ukraine; Also involved with Europe can lead to sales pressure. Any military confrontation between the two will in itself reduce risk appetite globally. However, regional proximity to the conflict could boost the sale of local assets such as the Euro.
The EUR/CHF may experience double-digit tensions due to pressure on the Euro. It is worth noting that the EUR/CHF is lower from March 2021. The first critical point of resistance appears to be the fluctuation above 1.0511; Where the pair retreated sharply in mid-January. Testing this without further passage can be a combination of falling signals; Both technically and fundamentally. This may maintain the EUR/CHF in the short to medium term.
