This year, the European economies have not fared well. It is because of this, the Forex Market witnessed many unexpected and curious events, which essentially saw many currencies lose a large portion of their value due to various crises, economic and financial problems.
While large swathes of the globe saw some changes in the financial sector, it influenced the European economies more strongly. The balance of money changed and the euro quickly became a weaker, less stable currency than the dollar.
The energy crisis, which began in spring 2011, was perhaps the most important and well-known factor that drove the euro’s value down. It was caused by the whole Ukraine situation and was basically an attempt to balance Russia’s profits with Europe’s gas demand.
The Eurozone, which includes most of the gas-based economies, suffered from high inflation that eventually led to the euro losing 20% of its value before the crisis. The Russian ruble, which is largely a pariah currency but grew by 15%, was the opposite.
USD/EUR has been a popular currency pair for many years. It is the most popular in terms of volume and popularity. Although the Euro has had some setbacks, it is still leading against many currencies (except for the dollar). If you’re interested in keeping track, see the EURO live charts here.
Additional Agricultural Crisis
Due to the Ukrainian situation, the agricultural crisis came later in the summer. It is clear to see the exact spot where the agricultural crisis struck, along with the worsening of the gas crisis in August. After this point, USD was more expensive than EUR for the first time in 2003.
This essentially led to a further dip in trust in euro, which resulted in a further drop in value for the USD/EUR currency pair. Despite the ongoing problems, signs of recovery began to appear by this point. However, it wasn’t until much later that the value began to improve.
As October turned into November, the dollar’s value began to rise. Although the former crossed the 1:1 rate, it was in the opposite direction. Although there have been speculations about the reasons why the euro devalued again, currently there is no clear answer.
Two possible explanations are available.
One reason is that winter is now considered to be more mild than it was. Many countries within the Eurozone believe that their energy reserves have been sufficient to meet the demands of the winter. The weakening one of these currencies is essentially the strengthening of the other in the ongoing battle for the ruble.
Another possible explanation is the Russian failures in Ukraine which could explain the increase in trust in the euro. Although it is unlikely, Forex can be affected by emotions and cold logic. We’ll find out what the reasons are later.
While the Euro is on the rise right now, it could not stay there. The EUR will shrink during winter frost, unless something catastrophic happens to the ruble. It will likely rebound at the end of winter frost if it does. However, we don’t know everything that could affect the currency’s course, so it is possible to see many things.