The US Dollar fell from its six month highs today (phew, fingers crossed for me as I am going to NYC in a couple of weeks), but get this - here is why:
"The U.S. dollar tumbled from six-month peaks against the euro on Wednesday, as comments by a European Central bank official rekindled speculation about an interest rate increase in the euro zone to quell persistent inflation pressure."
Just for fun, go read Ambrose Evans-Pritchard in today's Telegrpah discussing the economic situation across Europe. Collapse everywhere, even Germany hurt by the strong currency, and the idea is to raise interest rates?
This 'inflation' we are suffering will end in tears for us all. As oil has dropped 20% in a month and money supply has dried up it is not so hard to predict a sharp drop in inflation - it is a lagging indicator in any event.
If the EU raise interest rates it will utterly wreck Spain, Denmark, the Baltics and Italy. Why would they do this unless they wanted to ruin the eurozone. They can't possibly want to do this, so the 'EU Official' who said this must be mad.
UPDATE: From a Bank of England MPC member today in the Guardian...
Blanchflower described the BoE's forecast earlier this month of the economy standing still over the next year as "wishful thinking" and said things could be easily a lot worse.
"We are going to see much more dramatic drops in output," Blanchflower said. "The way to get out of it is to act, by interest rate cuts and fiscal stimulus and other things to try help people who are hurt through this."
"Sitting by doing nothing is not going to get us out of this and hoping that a knight in shining armour will come and lift us out of this is optimistic in the extreme."
And he said that an expected boost to exports from a weaker pound was unlikely to prove the "great rescuer" of the economy.