The single European currency, the euro, fell 0.05% to $1.0469, after falling to a 13-month low of $1.0461 the previous day. The euro is one of the largest components of the dollar index, making it vulnerable to movement fluctuations in the US market. The euro has been among the currencies hardest hit by the rise of the US dollar after the recent elections in the United States, as the expected economic policies of the administration of US President-elect, Donald Trump, prompted an increase in demand for the US currency..
In other currencies, the Japanese yen has fallen sharply, losing more than 7% of its value against the dollar since October, reaching below 156 yen to the dollar last week, its lowest level since July. The decline raised the possibility that Japanese authorities will take additional steps to support the currency in light of its continued weakness.
Pressure on European and Asian currencies is increasing due to recent geopolitical events, including escalations between Russia and Ukraine.
which have contributed to increased economic tensions. In addition, the unstable political situation in Germany, the euro’s largest economy, is exacerbating pressure on the euro and increasing challenges for the EU in addressing these economic and political crises.
Taken together, these factors point to the continuation of negative trends for European and Asian currencies at the moment, reflecting the dollar’s safe-haven role in the euro. Global markets. The euro is an essential component of foreign exchange (Forex) trading, as investors are noticeably affected by sharp fluctuations in its value. Companies and investors facing fluctuations in the euro may hedge against these fluctuations using forex contracts, which puts more pressure on the markets.
The impact of Euro volatility on global markets
The fluctuations of the euro are one of the factors that greatly affect the global markets, as the euro is the second most traded currency in the world after the US dollar. In the event of significant changes in its value, it can directly affect global trade, investments, and financial markets. When the euro faces a significant decline, such as recently when it fell to a 13-month low, it could lead to fluctuations in the prices of goods and services traded between euro member states and trading partners.
It is worth noting that the euro is a major currency in many global financial markets, as many international companies are affected by the exchange rates of the European currency with other currencies such as the US dollar and the Japanese yen.
Thus, a lower euro may make European goods cheaper for foreign importers, boosting European exports.
but at the same time it may increase the cost of imports into the euro, contributing to increased inflation. In terms of financial markets, euro volatility has significant effects on stock and bond markets. When the euro depreciates, European stock markets may fall due to concern about the impact on profits and economic growth in the region.
Conversely, investors holding other currencies such as the US dollar can benefit from these fluctuations, boosting capital flows to the US markets.
thus supporting the value of the dollar.
In addition to these economic factors, political and economic shifts in euro countries, such as elections or political crises, contribute to increased euro volatility. For example, political uncertainty in large countries such as Germany could lead to a further weaker euro in global markets, as investors see an increased risk.
Factors that led to the decline in the price of euro
The recent decline in the euro is due to several intertwined economic and geopolitical factors. One of the main factors contributing to this decline is the divergent monetary policies between the Euro and the United States of America. As the US Federal Reserve raises interest rates to combat inflation.
European central banks have adopted a more conservative monetary policy, leading to a yield differential between the two currencies. This spread made the US dollar more attractive to investors compared to the euro, which contributed to the depreciation of the European currency.
In addition, political and economic tension within the Euro has significantly affected investor confidence in the European currency. The ongoing escalations between Russia and Ukraine and the resulting economic pressures, such as higher energy prices and their negative effects on European economies, have contributed to increased concern about the stability of the euro. Political uncertainty in Germany, the euro’s largest economy.
especially in light of the internal challenges facing the EU, has contributed to low market confidence in the single currency.
Also, rising energy prices in the euro are causing significant economic pressures, as European countries suffer from an energy crisis as a result of the conflict in Ukraine, leading to a decline in economic growth in the region. These economic pressures increase expectations that the euro may face a recession.
which increases concerns about the sustainability of the European economy and negatively affects the euro price.
Technical factors also play a role in the euro’s decline. When the euro falls against the dollar, the sell-off is stimulated by investors who expect a further decline in the value of the European currency.
