• The ECB has announced a quick phasing out of bond buys, boosting the euro.
• Shoring up the currency helps the eurozone in the short term.
• The full impact of Russia's Ukraine invasion is still to come.
• ECB may refrain from rate hikes in 2022, bringing the euro down.

Influenced by inflation, (almost) ignoring the war – the European Central Bank has announced a fast pace of tapering its bond-buying scheme as prices rise and despite the adverse effects of Russia's invasion of Ukraine. EUR/USD has jumped, but it may be premature.

The ECB plans to buy some €40 billion worth of bonds in April, falling to €30 billion in May and €20 billion in June. That opens the door to raising interest rates already in the summer rather than in the autumn. While that would not be considered surprising after the previous decision, it seems hawkish given the war.

After two weeks of fighting, the Frankfurt-based institution seems to focus on the surge in commodity prices coming from Russian President Vladimir Putin's "special operation." Russia is the world's third-largest oil producer and some 40% of European natural gas is sent on orders from Moscow. Ukraine and Russia are responsible for a substantial portion of global wheat exports, and port blockades are already felt in supermarkets.

However, Russia's atrocities in a European country are pushing prices higher and destroying demand. A war on the doorstep of the eurozone is hitting confidence and also leaving consumers with less money to spend. Even if headline inflation rises, underlying prices may fall.

ECB President Christine Lagarde promised decisions based on new forecasts presented in March, but these new projections may remain slient while the cannons are heard.

The taper announcement serves to push the euro higher and somewhat squeeze the prices hikes coming from imports. However, that is nothing in comparison to the economic damage done by the war and the sanctions, and that may eventually haunt the common currency. It may come sooner than later, providing a selling-opportunity on EUR/USD now.