The great world economies, affected by the conflict between Russia and Ukraine

Posted on February 15, 2022 Geopolitical tensions have continued to rise in Eastern Europe in recent days due to uncertainty over a possible invasion of Ukraine by Russia. The President of Ukraine (Volodymyr Zelensky) has declared February 16 the Day of Unity in Ukraine, in response to information surrounding a possible start of an invasion by the Russian army. Meanwhile the US has temporarily relocated its embassy to Lviv (close to the Polish border). The US has threatened harsh economic sanctions in the event of imminent action by Russia, while Russia denies that an attack on Ukraine is planned and has reported its interest in continuing diplomatic talks to end this conflict. Today is the turn of the German chancellor, Olaf Scholz, who meets in Moscow with Vladimir Putin to try to ease tensions. The President of the ECB, Christine Lagarde, has affirmed in the European Parliament that high inflation in the Eurozone will persist for longer than initially expected, but the solid setting of medium-term inflation forecasts, in line with the ECB’s objective it’s reassuring. Lagarde reiterated a gradual withdrawal of monetary stimulus, with the aim of meeting her inflation target of 2% in the medium term. At the last meeting, she already advanced that the study of the new macro perspectives would allow decisions to be made at her next meeting on March 10. In the United States, different members of the Federal Reserve spoke publicly about what the institution’s roadmap should be for the next increases in interest rates, something that a few weeks ago was practically ruled out, such as a first increase of 50 bps, now could be very likely. The Kansas FED president commented that a 50bp rate hike at the March meeting is premature, as she does not consider the current situation an emergency. For his part, the president of the St. Louis FED stated that the institution should raise interest rates by 100bp for July, with the aim of combating inflation. Some analysts even urge the FED to call an extraordinary meeting to anticipate the first hike instead of waiting for the meeting on March 16, something that could be counterproductive and would further increase volatility. The Fed’s position is very complicated as markets are quite volatile and we could see higher yields until it appears that the Central Banks have taken control and inflation may have peaked. In the foreign exchange market, during yesterday’s Monday, the price of the EUR/USD pair moved in a range of 1.1280-1.1369, ending up closing the session in European time at levels of 1.1310. The interest rate on the 10-year US bond rose again strongly to 1.99%, due to the uncertainty in the markets. The euro depreciated against the Swiss franc to 1.0468 while the community currency also depreciated against the Japanese yen to 130.79. INFORMATIONTitleThe major world economies, affected by the conflict between Russia and UkraineDescriptionGeopolitical tensions continue to rise in Eastern Europe in recent days due to uncertainty over a possible invasion of Ukraine by Russia. Author GLOBALCAJA

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