Eur Is At Risk Of Devaluation Due To Energy Crisis

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Eur Is At Risk Of Devaluation Due To Energy Crisis

EUR Is At Risk Of Devaluation Due To Energy Crisis

Experts at Commerzbank have revealed that EUR/USD is at increased risk of devaluation in the backdrop of the recent energy crisis. Until the energy crisis is officially over, the Euro currency will remain at a greater risk of devaluation against the USD and other major currencies.

Winter is upon us, and it gives chills just to think about how Europe will survive without the gas. On top of that, it seems that Russia is also ready to test the nerves of European countries by shutting off the gas pipelines. The Russian side is demanding the EU lift the sanctions while the EU is demanding that Russia stop the war.

High Energy Prices And Poor Euro Area

Even if the European Central bank changes its monetary policy, it will not be enough to lift the pressure on the Euro. The math is a very simple one - High energy prices mean that the Euro area will get poor, and this will even lead to higher inflation. A closer look at the energy crisis reveals that the export prices are changing in relation to the import prices.

One of the biggest uses of Russian gas is to heat houses during the winter in European countries. In General, the EU area is known for its harsh winters, and it can get difficult to live comfortably without a heating option. On top of that, the shortage of energy products will also lead to increased prices of the products - A direct result of that will be inflation which will make things difficult for everyone.

It seems that there is very little ECB can do to solve the issue. Similarly, the US Fed is also struggling to deal with inflation despite a hawkish policy!

One way to solve this issue would be to import energy products from somewhere. But who can supply so much at such a scale to Europe? That's a question that remains to be seen!

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