Several current-account-surplus economies, including the euro area, are facing renewed pressure from higher energy costs. Earlier expectations for these funding currencies to strengthen are being challenged as rising oil prices could turn surpluses into deficits. BNY identified up to ten surplus economies, with surpluses driven by exports of manufactured goods. These economies also have high exposure to energy imports, which have supported their manufacturing bases.

Energy Costs And Trade Balance Risk

Based on the 2022–23 experience, continued rises in energy prices could lead to a rapid move from surplus to deficit for many of these countries. Data from iFlow shows market participants adding to previously underheld euro positions or hedges. European currencies such as EUR, SEK and CHF are seeing increased positioning or hedging activity, linked to concerns about the region’s energy costs. Risk-off sentiment continues amid the conflict, while orderly equity declines and commodity price volatility are having less impact on global rates. The article was produced using an AI tool and reviewed by an editor. FXStreet Insights Team selects market observations from external and internal analysts. We are seeing renewed pressure on economies with current-account surpluses, particularly in the Euro area, due to high energy costs. The expectation we held earlier in the year for these currencies to appreciate is now being challenged. Rising oil prices threaten to turn these trade surpluses into deficits, a significant shift in the economic landscape.

Trading Implications For European Currencies

The recent climb of Brent crude, which has been consolidating above $110 per barrel this month, is the primary driver of this concern. Looking at the data, Germany’s latest trade report for January 2026 showed a surprise deficit of €2 billion, a stark contrast to the surpluses recorded through most of 2025. This shows how quickly the situation can change for energy-importing nations. This pattern is a direct echo of what we experienced during the 2022-2023 period, where a similar energy price shock led to a rapid deterioration in Europe’s trade balance. The market is now pricing in a repeat of that scenario, as investors add to hedges against a weaker Euro. We’ve seen February 2026 flash inflation for the Eurozone tick up to 3.5%, further complicating the picture for the European Central Bank. For derivative traders, this outlook suggests positioning for a weaker Euro in the coming weeks. Buying put options on the EUR/USD pair with expiries in the second quarter could be a direct way to capitalize on this expected downturn. This strategy offers a defined risk while providing exposure to potential declines in the common currency. Beyond the Euro, currencies like the Swedish Krona (SEK) and Swiss Franc (CHF) face similar headwinds, as they are also tied to energy-importing economies. A broader strategy could involve shorting a basket of these European currencies against the U.S. dollar through futures contracts. This diversifies the position away from just a single currency pair’s specific movements. The ongoing volatility in commodity markets suggests that options premiums may be elevated, reflecting the increased uncertainty. Therefore, traders should consider the cost of entry for these positions. It may be prudent to build positions gradually rather than taking a large one-off stake. Create your live VT Markets account and start trading now.

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