Monday, June 30, 2008

Expect the Dollar to Drop Again

...because Europe is raising their interest rates in response to inflation.
BRUSSELS -- Yearly inflation in euro-zone countries hit a record 4% in June, the EU statistics agency Eurostat said Monday.

Soaring prices for fuel and food are raising pressure on the European Central Bank to raise interest rates for the first time in a year when it meets this week...

ECB officials have signaled they may hike borrowing costs from 4% to 4.25% to try to cool prices. This would be the first time they have shifted the rate since June 2007 despite major cuts from the U.S. Federal Reserve and the Bank of England, who moved to encourage reluctant banks to lend in the wake of a credit market crisis...

The European economy appears to be slowing sharply after a brief boom...

Oil prices have quadrupled in the last seven years, hitting Europeans hard because they also pay heavy taxes on fuel that can cost them some €80 ($126) to fill up a tank of a passenger car.
In Europe they pay over $125 for a tank of gas. Ouch!

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