The European Union has approved a plan to stop importing Russian gas by late 2027. This announcement was made during European trading hours on Wednesday. The market’s reaction to this news is uncertain, but it has impacted the EUR/USD exchange rate, which has dropped by 0.3%, nearing 1.1700. The Euro has weakened against major currencies, especially the US Dollar.

Euro vs Major Currencies

A table shows the percentage changes of the Euro against other major currencies. The Euro fell by 0.30% against the US Dollar, 0.75% against the British Pound, and 0.48% against the Japanese Yen. A heat map illustrates the percentage changes of major currencies. The base currency is selected from the left column, and the quote currency is chosen from the top row. This gives an overview of how different currencies are performing right now. The EU’s decision to phase out Russian gas brings long-term uncertainty for the Eurozone economy. This is seen in the options market, where implied volatility on the Euro STOXX 50 (V2X) has risen from 15 to nearly 17 this week. This indicates that traders might look for strategies that can benefit from expected price fluctuations, regardless of the initial trend. It’s worth recalling the significant economic slowdown and rise in inflation during 2022 when gas supplies were first disrupted. While this new plan provides a timeline, it raises concerns about increased energy costs for European industries, which could slow down economic growth and further weaken the Euro. Therefore, buying long-term put options on the EUR/USD, perhaps expiring in late 2026, could be a smart way to protect against this potential decline.

Trading Strategies

The market’s mild reaction today, with EUR/USD down just 0.3%, suggests that the 2027 deadline is still two years away. Current reports from Gas Infrastructure Europe indicate that EU gas storage facilities are over 95% full, and LNG import capacity has increased by 30% since the crisis started in 2022. There’s no immediate panic about supply, which suggests that selling short-term volatility could be a good opportunity in the coming weeks, assuming no new shocks occur. This situation primarily affects Europe, making currency pair trades more interesting than simply betting on one direction. Recent data from the U.S. Energy Information Administration shows the United States continues to be a strong net exporter of natural gas. Therefore, a strategy that involves going long on USD while shorting EUR could be appealing. Buying EUR/USD put spreads can help target this trade based on the differing energy situations in the two regions. Create your live VT Markets account and start trading now.

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