Talk of new sanctions on Russia weighs down the euro

The euro edged lower on Monday after Germany and France said a new round of sanctions targeting Russia were needed amid “very clear clues” of war crimes in Ukraine.

The euro, which has been under pressure due to worries about the economic damage from the war in Ukraine, slipped 0.15per cent versus the dollar to park at $1.1031 at 0755 GMT, not too far from last month’s almost two-year trough of $1.0806. Against sterling, it fell 0.24per cent to 84.05 pence, near a six-day low.

French President Emmanuel Macron said on Monday that a new round of sanctions targeting Russia was needed and that there were clear indications Russian forces committed war crimes.

While Russia-Ukraine peace talks dragged on, reports of Russian atrocities led German Defence Minister Christine Lambrecht to say the European Union should talk about ending Russian gas imports.

Russia supplies some 40per cent of Europe’s gas needs.

Ukraine accused Russian forces of carrying out a “massacre” in the town of Bucha, which was denied by Russia’s defence ministry.

Russia’s chief investigator ordered an official examination of what he called a Ukrainian “provocation”.

“More sanctions of course also mean that the risk of energy disruptions in Europe rises. Because of our own sanctions or because Russia might get completely serious with its counter-sanctions rather than just changing the payment mode for natural gas,” said Ulrich Leuchtmann, Commerzbank Head of FX.

“In my view the risk of significant euro weakness increases,” he said.