Euro about to fall below psychological barrier?

[Squire Allworthy]

This is good news for the Euro economies and let us all hope that it continues its rise. In currency I think the critical rates are those between the Western Economies and those in Asia.

I cannot see why there would be any sustained rise in the dollar, departure from commodities is part of it. Perhaps there is a feeling that the US economy will be kept alive by digouts for another few years? It is like one of those horror films where the beast just won't keel over.

[euroboy]

The reason why the euro has fallen against the dollar is because traders along with the market analysts and commentators believe that the ECB will lower interest rates sometime early next year while t. he US is showing signs of slighly better economic activity. They have come to this conclusion from their 'reading' of the ECB president's emphasis on the weakening economic climate in the eurozone along with the fact the ECB didnt change rates yesterday. The ECB President also noted that the bank was not biased towards rising interest rates leading commentators to reason that the bank is going to reduce rates. Traders are shifting funds from Europe into the US for reasons that I cannot understand. There is still a rate differiental that favours Europe even if the US ups interest rates to regain control of inflation there. Perhaps traders believe that the US market has bottomed out and that its a good time to get in

I personally feel that the ECB will raise interest rates in the future to reduce inflation and curb expectations of increased inflationary pressures on wage levels. We could see rates up near 6-8% in Europe within the next 5 years if high oil prices and food prices are here to stay. The ECB hasn't risen rates because it is adopting, like the BoE, a stragety of 'wait and see' since it's facing a very complicated economic policy environment of rising inflation and falling economic activity. It is waiting until the picture is clearer, if inflation is here for the long term, before it takes the correct monetary response.

If the ECB is trying to alter expectations towards future inflation, then it is in its own interest to be coy about future interest rates changes. The fact that oil prices have fallen over last number of days may make it easier for the ECB to raise rates, since it can do so without having to worry about high oil prices suppressing eurozone growth. The ECB, I suspect, has been concerned about growth and has felt that rising rates in an environment of high oil prices and the credit crisis might worsen the situation and drive the eurozone into a situation of stagflation, something they dont want. Now with lower oil prices to help re-stimulate economic activity, it can raise rates to meet its mandate of inflation control. In the absence of high oil prices and the credit crisis, the ECB would have risen rates much higher than where they stand at present. Now oil prices are falling, though still violilite, and the credit markets are slowly returning to normal levels of functioning(although they will never return to old capital volumes...largely as a result that the bad practices in the past must stop), the ECB will act and not in a way that irish houseowners will favour.

[CelticAtheist]

This is good news as soon as it levels out quickly.
Our exports were being hit hard.