EUR/USD: Here’s Why The EU Energy Ministers Meeting May Be Bad For The Euro

Start Trading

The EUR/USD pair price action following a hawkish European Central Bank (ECB) Thursday session was disappointing as the meeting failed to address the lingering value slump of the Euro.

The ECB’s Cautious Stance Offers Little Approval

According to ING economic experts, they expect the EU energy ministers’ discussion to put additional downward pressure on the common currency. This is because short-term gains shifted in favor of the Euro, but it was in vain.

Furthermore, the European Central Bank (ECB) president, Christine Lagarde, was asked about the weak Euro. She, however, was short on any possible answer to give beyond uttering, “The ECB is attentive.”

Growth differentials and the global investment landscape are currently dominating the forex sector. Still, not one of these actions is giving the Euro the needed support. 

ING noted that the meeting might have worsened the situation of the Euro going by its current market performance. Experts at ING gave reasons why the meeting could be bearish for the currency.

For example, agreements on energy price caps, gas sharing, and power levies appear tricky and may be postponed. 

In addition, the legally required electricity reductions could lead to “de-industrialization” and civil unrest, according to Belgium’s Prime Minister. The Belgian representative echoed what many have feared would emerge should the decision makers make the difficult choice.

If Russian oil and gas limits are sanctioned, Russia will instantly halt the remaining oil and gas deliveries to the EU blocs.

Moreover, the analysts at ING noted that the situation is dicey for the governments of the EU nations. In trying to remedy an already tense situation, the EU may have to make things worse for the millions of EU residents.

As the Fed continues its aggressive move, the EUR/USD is expected to trade in a wide 0.9900-1.0100 range.

The EU’s Continued Energy Crisis

The eurozone’s shared currency has been steadily declining as fears of a recession grow. This development is fueled by rising panic about the bloc’s energy supply. Russia has shown its readiness to cease limiting gas supplies to the EU blocs for some time now.

Meanwhile, the meeting of energy ministers on Friday is intended to iron out possible ways to address the issue. The crisis has made access to energy for domestic use expensive and out of the reach of the average European income earner.

Ursula von der Leyen, President of the EU, has laid out a five-point strategy involving a price cap on Russian gas. This is likely to face stiff opposition from some member countries.

However, a senior EU official has stated that there is no majority support for capping the Russian gas supply. The measure by the EU member states is a measure to limit Russia’s revenue, which is believed to fund the war in Ukraine.

In reaction, Russian President Vladimir Putin has threatened to cut energy supplies to the EU bloc if they move ahead with their plans.

Start Trading

Leave a Comment

1 Institute Trade Blog | All Rights Reserved 2022 | Disclaimer | ✉ Contact