04-07-2008
Dollar, euro, reasons for betting on a reversal
| European Central Bank decision on interest rates looks very odd. Inflation, in our opinion aggravated by increasing interest rates differentials among the two currencies ( ECB seems to be contributing to inflationary pressures by sending the dollar weaker, with disproportionate effects on raw material costs) cannot be tamed by a quarter percent rate increase. The unanimous vote that brought to the decision looks also odd if compared with statements last week by some representatives of variuos weaker economies, and is likely to have been traded against future promises. Next G8 meeting has Us officially sponsoring a strong dollar, and this semester of EU presidency by the French should pressure ECB to listen more attentively to finance ministers from variuos states. It could not happen immediately, but conditions are ripe for a dramatic devaluation of euro. |