Things move quickly here in Europe. So, a quick summary of events.
The ECB increased interest rates by 75 bp and the Euro responded by gaining 1%. Deutsche Bank expects another 75bp rise in October as the ECB says inflation is in its gun sights. I suspect this means we will see some FX volatility as the different central banks raise interest rates but for now the USD is weaker and that generally helps ease commodity prices. meanwhile, the banks it seems are looking at their options to keep the lights on and ATM’s running and are stress-testing how they can cope with power shortages and lining up alternative sources of energy, such as generators, so that ATMs and online banking don’t go dark!
EU Ministers are meeting today to see how to resolve the energy price emergency. The European Commission has proposed offering emergency liquidity for power firms facing soaring collateral requirements and the Czech Industry minister thinks this will happen according to Reuters. It is also likely that energy prices will be capped at 200 euros ($199.86) per megawatt hour for non-gas generators so applying to wind, nuclear and coal generators. There are disagreements on whether to cap Russian energy prices and face likely retaliation from Russia, which is cutting off of all Russian energy. It is also looking at windfall profit tax from non-gas generators as well in order to help subsidize consumer prices.
In other news, German gas importer VNG has asked the German Government for a bail out following Uniper as the crisis spreads and certain energy firms seek to avert bankruptcy.