Despite the euro zone being in recession, the euro is dramatically rising against the US dollar, from $1.20/euro in July to $1.36 today. Why, because massive European Central Bank (ECB) action prevented Spain from collapsing, and the ECB is fast becoming an inflation hawk and has thus started to shrink its balance sheet, until, of course, the southern European countries go into recession and the ECB again loosens monetary policy.
Tag Archives: US Dollar
UN UNbelievable!
The Friday File: The UN has decided to limit the reports it publishes to a maximum of 10,700 words. They are doing it to save $ and reduce burden on translation services. This will also save a lot of diplomat’s time, which must obviously be worthless. Otherwise, they would have done this long ago. Costs are rising because the UN budget is in U.S. dollars and the dollar has been weakening against other currencies.
Moral Hazard
Ideally Greece would leave the Euro, default on its debts, and get on with its economic existence. But, leaving the Euro would be a disaster for the Euro zone. So the Europeans won’t let it happen. Neither will the Chinese as they do not want the US Dollar to be the only reserve currency. Since the Greeks know this they have no incentive to financially behave because they know they will get bailout out.
Bin Laden Dead, Markets Shrug
The death of bin Laden is a non-event in the markets. Had there been a rally, the US dollar, precious metals and commodities should all have weakened and stocks should have rallied as investors moved from safe havens to riskier investments. But, everything is up! The dollar is slightly higher, stocks are up marginally and gold, platinum and palladium are also up slightly. No visible market trend is yet evident.