Geopolitical energy shocks combined with drought challenges may gradually reveal the pressure of euro overvaluation
智通财经2026/08/18 13:01Show original
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- Derek Halpenny, an analyst at Mitsubishi UFJ Financial Group, pointed out that the rise in energy prices triggered by the situation in Iran is posing significant resistance to economic growth in the eurozone and the euro exchange rate.
- The further surge in natural gas prices is exposing Europe to the shock of worsening terms of trade, and the eurozone’s decision to delay winter gas purchases following the outbreak of conflict now appears to be having the unintended negative effect.
- Meanwhile, drought in many parts of Europe has not only affected grain production but has also further increased energy demand, creating a double squeeze on the economy.
- Mitsubishi UFJ estimates that the current EUR/USD exchange rate is overvalued by about 2.5% to 3%. If geopolitical risks and weak economic activity begin to undermine market sentiment, the euro may face even greater underperformance pressure.
- The euro recently traded around $1.1574. The key to its subsequent trend lies in the actual reliability of winter energy supplies and the European Central Bank’s policy response in balancing growth and inflation.
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