Euro Struggles as Ukraine Conflict Start to Bite

The euro fell to a nearly two-year low against the US dollar as commodity-dependent currencies hit multi-month highs after Russia’s invasion of Ukraine raised oil prices.

The euro slid by about 1% to $1.0822, its lowest since May 2020. The currency has fallen 4% since Russia began the invasion.

Oil futures surged by over 20% to highs not seen since 2008 on the back of threats of a ban on Russia’s oil.

Analysts believe that Europe is too interlinked with Russia, especially in energy terms, to avoid serious fallout. This negativity is forcing a gloomy outlook for the euro.

Experts are warning of a major energy supply shock, which, together with lingering COVID impacts, is set to have a major impact on inflation.

The European Central Bank (ECB) meets this Thursday and faces a tough task as inflation and growth pressures are creating two pressure points that may force the ECB to try to be more aggressive with interest rates sooner than it would like.

What does this mean for me? 

The euro was always going to be severely affected by the conflict in the Ukraine. As a keen FOREX trader, you could have anticipated this and adjusted your portfolio accordingly.

There is still more ground for the currency to lose, with the Ukraine conflict resolution timetable unclear. Therefore, there is still time to take an informed look at your FOREX portfolio.

As mentioned, commodity-based currencies, usually minor currencies, are set to gain ground as countries seek energy alternatives to Russia.