Sat. May 18th, 2024
Despite the Measures Taken by the ECB, the EUR Expects a Decline

The year 2022 has proven to be the worst year when it comes to the economic decline. It has tested the potential of each country and region in handling their economic downfalls.

It is shocking to see that the countries hit by the economic pressure the most are the ones that had considerably the strongest economies.

Even the United States has suffered broadly due to the economic pressure. The country was even expected to face the recession but it is gradually coming out of the red zone.

 The United States Federal Reserves was the entity responsible for making sure they came up with a policy to control the rising inflation.

For the US Feds, it was important to deal with inflation before it it could lead to a massive disaster.

The Feds did come up with the interest hike policy to deal with the situation. The US economy was finally able to recover as its interest hike policy has brought the interest rates under control.

Even at the moment, the United States’ interest hike policy is in play. Because of this, the value of the USD has continued rising against the rest of the currencies.

It is to be kept in mind that despite the economic pressure, the US did not face any kind of energy crisis.

The European Region is Still Troubled

In the other hand, the European region is facing a troublesome situation. It is not only impacted by the economic pressure due to the rising inflation but it is also facing major energy crisis.

The Europe is also fearing that it may end up facing recession. In reality, it has a higher chance of facing recession than the United States.

This is mainly because the European region has relied too much on other countries and regions when it comes to resources.

In the year 2021 and 2022, the entire world faced the semiconductor shortage due to the pandemic. The most concerning part was that Europe only produces 5% of its overall semiconductor requirements.

The rest, Europe imports from the rest of the world but it is among the countries using the highest number of semiconductors.

As the rest of the countries from around the world are facing a similar economic crisis, it is quite obvious that the European economy would take a major hit.

Russia’s Tactic against Europe

Just like the semiconductor, the European region is dependent heavily on other countries for energy and power.

In February 2022, Russia waged a war against one of the European Union members, Ukraine. As a result, the European Union started implementing sanctions on Russia to stop it from invading Ukraine.

Since February, the EU has attempted to do whatever it can from its side to stop Russia from invading Ukraine. However, Russia has Europe’s weakness and that is power and energy.

Being the highest energy provider of Europe, Russia has reduced its energy and power supply to Europe. It has brought it down to 5%-10% of the total supply it provided.

European Currency is in Trouble

As the European region was already struggling with economy and it caused issues with the European price forecast, it has energy crisis that is going to grow fierce in winters.

The country is going to take a huge hit to its economy and that is going to cause a huge plunge in the price of the euro.

Euro has already lost its worth and status in the forex trading industry. This is because the value of the euro has lost its competition against the dollar in the light of the recent events.

It is currently trading low than the value of the dollar, which had not been the case for decades.

The Feds have finally implemented the interest rate hikes in the continent to ensure that it is able to fight off the rising inflation rates.

However, the energy crisis being faced by Europe is going to cause huge problems when fighting with high inflation rates.

This is the reason why the hike in the interest rates may not let the euro grow in value in the forex market because of the energy crisis.

The people in Europe are suffering a lot because of the energy crisis as there has been up to 400% spike in the electricity bills in the continent. This would hinder the interest hike policy and further increase the inflation rates.