Fabio Panetta, an ECB executive board member, said the global energy crisis could affect financial stability. He said shifts in global risk perception may put pressure on government bonds of highly indebted countries. <\/p>\n
He said leading indicators, including falling household confidence, suggest a possible slowdown in the real economy. He also said energy market tensions may affect inflation and growth, alongside financial stability. <\/p>\n
He said existing vulnerabilities could amplify shocks. He added that some non-bank financial intermediaries show leverage and liquidity levels that may be inadequate during acute stress. <\/p>\n
He linked a stronger US Dollar, pressure on long-term interest rates, and capital outflows from emerging markets to a move towards safer assets. He said markets\u2019 perception of Italy\u2019s public finances has improved amid current geopolitical tensions. <\/p>\n
He said ECB adverse scenarios that assume energy supply normalisation and a recovery between the fourth quarter of 2026 and 2027 are now more likely. The Euro showed no immediate reaction; EUR\/USD was 0.5% lower near 1.1530. <\/p>\n
The ECB sets interest rates and manages Eurozone monetary policy to keep inflation around 2%, with eight policy meetings a year. QE involves creating Euros to buy assets and tends to weaken the Euro, while QT ends net buying and reinvestment and tends to support the Euro.<\/p>\n
We are seeing the long-term effects of the energy crisis that was a major concern back in 2025. The slowdown in the real economy has materialized, with recent Eurostat data showing Eurozone GDP growth was a tepid 0.2% in the last quarter of 2025. This sluggish environment suggests that options strategies protecting against further downside in European equities, like buying puts on the Euro Stoxx 50, could be prudent.<\/p>\n
Concerns over inflation persist, creating uncertainty for financial stability just as was predicted. While the headline inflation from the energy shock has faded, core inflation remains sticky at 2.7%, well above the European Central Bank’s target. Therefore, we believe traders should be cautious about aggressively pricing in ECB rate cuts, and positioning in interest rate swaps that bet on a ‘higher for longer’ policy may offer value.<\/p>\n
The risk to government bonds of highly indebted nations is becoming more pronounced again. As we noted in 2025, changes in risk perception can pressure these markets, and we are seeing this now as the Italian-German 10-year bond spread has widened to 150 basis points in recent weeks. This suggests derivative traders could consider short positions on Italian BTP futures as a hedge against further sovereign stress in the Eurozone.<\/p>\n
The preference for safer assets, which drove the US Dollar higher in the past, remains a key theme. Given the weak European growth outlook compared to the relative strength in the US economy, the path of least resistance for the Euro appears to be downwards. We feel that holding short EUR\/USD positions through spot or options contracts continues to be a viable strategy in the coming weeks.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" Panetta warned energy crisis may threaten stability, pressure high-debt bonds, and worsen inflation, growth amid vulnerabilities.<\/p>\n","protected":false},"author":103,"featured_media":17023,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-46196","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46196","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=46196"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/46196\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media\/17023"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=46196"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=46196"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=46196"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}