Upcoming Cold winter and Burning Energy Prices, What will Europe do?
The EU plans to intervene in markets directly to curb rising energy costs, threatening to push the Euro area's economy into a deep recession.
EUR: the eye of the storm
2020-04-23 • Updated
Broken glass
“Any two points can make a straight line” – that’s a fair reply to the picture below if I intend to convince you that the mid-term outlook for the Euro is duller than anything else. Let’s see the strategic horizon then.
It looks like the downtrend rarely has been alternated by an upward trajectory with the EUR/USD. The breaking point is the crisis of 2008 after which the EUR could never stand up against the USD and hold its ground for more than a year or so. The last episode of a downward movement which starts in the middle of 2018 is so smooth and consistent as if it was “supposed” to be there. In this context, the vulnerability of the EUR against the US dollar due to the virus changes little in the grand scheme.
In fact, the crisis Europe is going through now may expose and propel those internal mechanisms that are driving the EUR down. Those mechanisms may be the same that question the economic integrity of the European Union itself, and hence, EUR as well. It’s yet time to open Oswald Spengler’s “The Decline of the West”, though. What’s happening right now in Europe?
Lower than expected
The latest data input from the European economic indicators was the Euro Area Manufacturing PMI. The released 33.6 mark was significantly lower than the expected 39.2, even with the factored in virus drawdown. That means that the situation in Europe may be worse than it may be conceived. In fact, the more news comes to the stage, the more it seems so. No surprise that the European stocks are shaken and the EUR gets weaker.
Is there a way out?
In theory, of course, there is. But realistically, it is very hard to achieve a sustainable exit from the recession for the EU as such. There are too many disparities and economic differences between the countries, applied to the virus response specifically, and in general, that has been the case even before the virus. The infections numbers are still rising in some of the countries, while in others they never have threatened the state as much as they did from the very beginning for others. Virus lockdowns are big damage to businesses, and lifting these lockdowns will be another problem when the time comes. And the list goes on, so it is easier to name what is not an obstacle for the EU to get over the crisis and have the EUR get in the zone of confidence. Let’s not be pessimistic about the EUR though. The battle goes on.
Similar
The Fed to Decide the Oil Market’s Future
The oil prices rally and world central banks’ dovish monetary policy caused by the Covid-19 pandemic were the main reasons for current inflation growth…
Gas lights up
For the last several weeks gas was skyrocketing at an enormous pace. It has gained more than 17% from August 18. What is the reason for such moves?
Latest news
Oil Prices Plunge On Falling Fuel Demand Concerns
The energy industry has undergone several major changes in the XXI that are becoming increasingly apparent…
Bitcoin 2024: The Story Is Cyclical
In the dynamic world of financial trading, understanding the nuanced relationship between the Federal Reserve's key interest rates and Bitcoin can be a game-changer…
Will NFP Be Positive for the US Dollar?
As the US Non-Farm Payrolls (NFP) take center stage, this month's data gains special attention, particularly after the unemployment rate took a concerning turn in the previous month. The US ADP Employment Change reveals a significant decline, with the economy adding 298K new jobs...
