The euro is seeing red on Tuesday and dropped below the 1.07 line earlier. In the North American session, EUR/USD is trading at 1.0707, down 0.67% on the day.
EU to block most Russian oil
The EU announced on Tuesday that it had reached an agreement to ban most Russian oil imports by the end of this year. The dramatic move is a compromise in which the ban will apply to oil that arrives by sea, with an exemption for land (pipeline) oil imports. This will allow Hungary and other countries to continue to receive Russian oil. With Germany and Poland also ending pipeline imports, some 90% of Russian oil exported to Europe will be blocked. The move has sent crude oil prices higher and sent the euro sharply lower, as the new sanctions are sure to take a toll on the eurozone economy.
It’s up, up, up, for Eurozone inflation. In May, CPI hit 8.1%, setting a new record high for a seventh straight month. This was higher than the April record high of 7.4% and above the forecast of 7.8%. The reading comes on the heels of Germany’s May CPI, which surged to 8.7%. This was sharply higher from 7.8% in April and above the forecast of 8.0%. France and Spain also reported an acceleration in inflation.
The ‘usual suspects’ driving inflation are at play, with the war in Ukraine and upward pressures on energy and food prices showing no signs of easing anytime soon. As inflation is broad-based, there are forecasts that Germany’s inflation rate could top 10%. The EU’s plan to block most Russian oil imports has sent oil prices even higher, which will only exacerbate inflationary pressures in the eurozone.
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EUR/USD Technical
- There is resistance at 1.0736 and 1.0865
- EUR/USD is testing support at 1.0648. The next support line is at 1.0519
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