Dollar faces new challenges as European Central Bank (ECB) and Federal Reserve now compete to contain inflation
Kathy Parker
Jun. 10, 2008

The US Dollar’s future may not be as bright as we thought before. Something has changed. The European Central Bank and Federal Reserve are now competing to contain inflation. That means higher rates in Europe and the US.

The bull market in Dollar may not materialize for a while. US Dollar can move sideways for an extensive period of time till inflation cycle tops out.

The 15 nation European Central Bank’s top priority is to aim at ensuring the preservation of price stability.

In US Federal reserve is concerned about inflation. But interestingly, Eurozone inflation, at 3.6 per cent, is far above the ECB’s target of an annual rate “below but close” to 2 per cent.

That means rates will rise both in US and Europe. It seems Eurpeans are more concerned about inflation than the slowdown in the economy due to higher dollar.

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