The Euro (NYSE: FXE) and other European currencies are hitting new multi-year lows against the U.S. Dollar (NYSE: UUP) and other reserve currencies as investors seek safe harbor from volatility in the continent amid Russia's invasion of Ukraine.
The Euro slid as much as 0.7% against the dollar on Monday, while the British Pound (NYSE: FXB) slipped roughly 0.76%. The Swiss Franc, another popular reserve currency with international investors, slid about 0.64% by writing. Some currencies have hit lows not reached since the initial onset of the coronavirus pandemic.
Monday's slide is the latest in an ongoing trend that began in late February with Russia's invasion of Ukraine. The onset of international sanctions amid the assault figuratively kneecapped Russia's economy as intended, though as many experts predicted, the effects were felt throughout the world.
For Europe, however, sanctions come with considerably higher blowback than for the United States. Many private interests in the U.S. have considerable investments in Russia, but Europe finds itself dependent on critical resources such as energy products. Early this year, for example, the European Union and International Energy Agency (IEA) have accused Russia of artificially exacerbating the continent's gas crisis amid the tense standoff leading up to the invasion of Ukraine.
The European Commission is currently drafting a plan to reduce Russian energy consumption, according to an anonymous source speaking to Bloomberg. Any such plan would require the approval of reluctant states, such as Germany, whose deep investments with Russia would make divesting an immensely costly endeavor.
Regardless of whether or not the E.U. moves on any plans to slim Russian imports, the U.S. appears to be making progress towards wider-reaching sanctions. A bipartisan effort to suspend trading with Russia and Belarus, including halting energy imports, is underway in the House of Representatives. President Joe Biden has reportedly discussed the plan with E.U. leaders but has yet to reach a decision.
However, any unilateral decision to ban energy imports and enact deeper trade sanctions would still likely have considerable blowback, given the European economy's proximity to Russia's ailing economy. As such, it's reasonable to expect current trends to continue, with safe havens such as USD and gold trending favorably into the near future.