fbpx

DOLLAR SURGES AS EUROPE FACES ENERGY-DRIVEN RECESSION

Harvest Global Markets :

The US Dollar remains high in demand, as markets reiterate their hawkish expectations ahead of the Jackson Hole meeting, and increasing gas prices hurt other regions of the world, the Euro zone in particular. The USD is seen to reach a 20-year high, as global risk sentiment fuel defensive trade. The pandemic, the supply disruptions from Russia-Ukraine conflict and harsh climatic conditions have led to a cute energy crises faced by the world in general and by Europe in particular.

Although hawkish monetary policy tends to persist in the US for the greenback but the restricted Russian energy supplies have given rise to severe energy inflation in the Europe, and particularly in Germany which is known to be the industrial heartland of Europe. Putting the European economy on the edge of downturn, through either increased prices or by industrial shutdown as further increase in the price levels may not be welcomed by the households or the industries in the continent. The latest report from the finance ministry of Germany indicates that the energy prices were up 105% as compared to the previous month of July. With winters approaching, this can be expected to go even further as rough conditions may further make it difficult to transport any alternative energy sources reach Europe.

The uncertainty of Russian supplies makes it important for Europe to switch towards alternative energy sources such as Liquefied Petroleum Gas and coal that may transform the economic landscape of Europe as it has traditionally relied on the Russian oil and gas supplies for its survival and growth.

Europe now diverges from its clean energy approach and is considering alternatives as coal and Liquefied Petroleum Gas (LPG) to meet the energy demands for households and industries in order to sustain the energy demand in the continent, this explains the unprecedented rise in the prices of Natural Gas, which have increased to almost 40% in August and nearly 300% this year.

The upcoming Jackson Hole meeting due this Thursday & Friday will provide further insights about the dollar index as Fed continues to maintain stern spikes in the interest rates and impact the EURUSD currency pair.

Share this post