As the Dollar bull continues to gain momentum, other currencies are falling like targets in an arcade game at a county fair. The irony of all this is that the U.S. economy is not doing well at all. It's just is is considered to be less bad than most others.
ECB head Jean Claude Trichet this morning acknowledged overnight for the first time that economic weakness in the European Union now outweighs the risk of inflation. This just one month after he raised interest rates to combat rising inflation. Now, it appears that he may be forced to halt his rate tightening schedule to prevent further damage to European economic prospects.
The Dollar appears to be the trade du jour for the time being. Note below the connection between the Dollar's strength and just about everything else! The next time someone questions the link between the Dollar and commodities, just show them this. The next time someone says that having a weak currency is good for the economy, show them this, because that's hogwash! Having a strong currency is the single most anti-inflationary policy that can be implemented. Even maintaining a strong currency against other world currencies helps to keep inflation in check because it helps to prevent importing inflationary prices from other countries when the United States imports their goods. As goes the Dollar, so goes inflation. They move inversely to each other.
US Dollar -- On a Green Streak
Euro - almost a mirror image of the Dollar
Gold
Crude Oil
Grains
Australian Dollar
Canadian Dollar
Great British Pound
New Zealand Dollar
Swiss Franc
Chinese Reminbi Yuan
DJ Commodity Index futures
