Wed, December 07, 2022

Should We Panic About the Euro?

euro

One of the biggest recent financial news is that the dollar touched the euro’s value. Due to the dollar’s incline and the euro’s decline, the currencies have more or less evened out. We can see that with today’s EUR/USD open, which laid flat at 1.00. However, the equilibrium has spawned a lot of panic and overexaggerated claims.

Most of them come from sensationalistic claims that Europe is on the brink of financial ruin. And while many European countries are struggling due to the Ukraine war and lingering Covid effects, the situation is overblown.

Namely, we can see that from the Eurozone’s financial consumer confidence report from August. While those subscribing to the financial destruction theory would expect it to be in constant decline, it’s holding firm. The latest European Commission release counters that, however, showing consistent performance.

The financial consumer confidence report shows the number -24.9, which is exactly the same as the one from the previous month. In other words, while the euro is not doing fantastic, it’s mostly halted its decline. The likelihood of recovery is solid, although the timeline for it remains unclear.

One possible concern is the Economic Sentiment Indicator by the bloc. It does show a slight decline, from 98.9 to 97.6. It even underperformed expectations of 98.0.

Undoubtedly the largest looming threat for the European economy, and the euro as an extension, is energy. With the war going on and sanctions in place, Russian energy imports are halted, creating energy cravings in a lot of European countries. However, some analysts believe that the threat is creating a misleading image. Namely, if markets focused less on the energy hazard, many believe we’d be seeing an incline in the euro’s value.

While the euro is not in a brilliant spot by a long shot, there’s no reason to panic. Financial experts are confident it will recover, and forex traders should readjust accordingly.

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