What Does Austria’s Lockdown Mean for the Euro?

Market Movers
3 min readNov 19, 2021

Not the news we would have liked to finish the week with, but it’s just been announced that Austria will go into full national lockdown from Monday for 20 days. They’re seeing record case numbers and they have one of the lowest vaccination rates in Western Europe.

The problem right now is that case numbers are high throughout Europe. Germany is also seeing its intensive care wards filling up so they may have to take action as well. But now that Austria has taken action, they may be the first domino that leads to others doing the same. It’s obviously not popular for policymakers to force restrictions on people, but once one country has done it, it opens the doors for others.

The Chancellor of Austria said, “Sustainably increasing the vaccination rate is the only way to get out of this vicious circle… Too many people have behaved with a lack of solidarity”.

The euro had already been taking quite a beating this week as finally, the forex markets were showing the concerns we were seeing in other markets first. It’s clear the conversation with the Federal Reserve in the US is now focused on interest rate hikes, and the Bank of England are expected to raise rates possibly in December, especially with the data releases this week. But the ECB are nowhere near tightening right now.

It seems Christine Lagarde has no interest in what the markets think and is only concerned about the economy. Just yesterday she said:

“We must not rush into a premature tightening when faced with passing or supply-driven inflation shocks,”

“At a time when purchasing power is already being squeezed by higher energy and fuel bills, an undue tightening would represent an unwarranted headwind for the recovery.”

“We should continue nurturing these forces by not withdrawing policy support prematurely,”

If we’re going to be seeing more lockdowns sweeping across Europe, this could harm economic growth, which means tightening would come even later. Meanwhile, eurozone data is showing inflation is on the rise. So is Europe going to be dealing with the issue of stagflation? If you don’t know what that is and want to know more, click up here to watch our explainer video on stagflation.

As I read in Bloomberg this morning, the decline in the euro seems to be following the eurozone economic trend, as we can see from the Citigroup Economic Surprise…



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