European Central Bank policymaker Olaf Sleijpen said rising energy prices are likely to feed into the wider economy faster than during the 2022 energy crisis, according to Reuters. He said the ECB cannot control oil and gas prices, but can respond if second-round effects appear. He added that more information on possible second-round effects is expected in April.

Energy Prices May Hit Faster

The comments did not lead to a clear market move in EUR/USD. At the time of reporting, EUR/USD was down 0.2% on the day at 1.1588. We are seeing comments from European Central Bank officials that rising energy prices could feed into the broader economy more quickly than they did back in 2022. The market appears to be waiting for more concrete data in April, as the EUR/USD pair has shown little immediate reaction. This suggests traders are in a holding pattern, but the underlying risk is growing. This caution is justified given that Brent crude prices have steadily climbed in the first quarter of 2026, now trading consistently above $95 per barrel, up from around $80 this time last year. Similarly, European TTF natural gas prices are 25% higher than their late 2025 lows due to a colder winter and restocking anxieties. These are tangible price pressures that cannot be ignored. The most recent flash estimate for Eurozone inflation in February 2026 came in at a stubborn 2.8%, surprising many who had expected a continued decline toward the 2% target. This shows that underlying price pressures, especially in the services sector, remain strong. The concern now is that this new energy surge will add fuel to an inflation fire we thought was dying down.

Trading Implications For Rates And Fx

For derivative traders, this means the implied volatility on euro-related assets is likely undervalued. The market has been pricing in a calm environment with potential rate cuts later this year, but these comments introduce a significant hawkish risk. This sets up a scenario where options protecting against a stronger euro or higher European interest rates could become more sought after. One potential strategy is to buy straddles or strangles on the EUR/USD, betting on a significant price move after the ECB’s April meeting, regardless of the direction. The current market indecision presents an opportunity to position for the volatility that will come once the ECB signals its next move. The cost of these options is still relatively low compared to where it might be in a few weeks. We should also re-evaluate positions in interest rate futures, like those tied to Euribor. Bets on deep ECB rate cuts in 2026 now look increasingly risky. Traders should consider reducing exposure to these positions or hedging them by pricing in a “higher for longer” interest rate scenario. Looking back from our viewpoint in 2026, we remember how the ECB was perceived as being behind the curve during the 2022 inflation surge. The memory of that period suggests policymakers may act more preemptively this time to protect their credibility. This historical parallel implies that the risk of a surprisingly aggressive ECB response is higher than the market is currently pricing in. Create your live VT Markets account and start trading now.

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