Once seen as a potential rival to the US Dollar as the world’s reserve currency, the Euro Zone crisis has also plunged the Euro into controversy. One of the major problems that the troubled countries in the Euro Zone face is the fact that a common currency disallows fiscal policy aimed at making exports more competitive. Analysts have now started considering if the Euro Zone would be better off focusing on export led recovery as opposed to concentrating at austerity and structural reforms. This would require the Euro Zone to pursue quantitative easing like the United States, which means printing more currency and effectively devaluating the Euro.

A devalued Euro would provide competitive advantages to European exporters whose competitiveness has been on a steady decline as China has captured most of the export market. The Euro Zone is China’s largest trade partner, but reports indicate that exports to the Euro Zone fell 2.4 % in April as compared to last year. In light of declining export demands, China has also been focusing on promoting consumer spending to keep the economy growing at above 8%. Weakening global demand, coupled with China’s shift from manufacturing to consumption will also affect the commodities market.

An economy focused on consumption tends to be less primary commodity intensive than manufacturing. This is especially true for materials such as copper, coal and other industry focused commodities. As Chinese demand for these raw materials reduces, prices are likely to fall. However, chances are that the Euro Zone and the United States will pursue a policy of devaluating their currency and thus their demand for commodities might keep up the prices. However, given that growth has been so weak, it is unlikely that printing more money will be keep their industries competitive for too long. The loss of competiveness in the Euro Zone is also partly due to structural problems that persist in their industrial sector. Although it is hard to predict what will happen to commodity prices in this economy, China’s export statistics is a good indication of demand.