An interesting report on the Time magazine blog outlining how the US dollar is actually weakening against the Euro and the what are the prospects for some growth in the US economy. Considering the mess the that many of the Euro zone counties are in this is alarming. Consumers have been badly affected by the increasing cost of food and fuel and the rising food and energy prices but they are not part of the core inflation that the US Fed use to monitor inflation. Therefore these commodity price increases have no significance on US monetary policy – i.e. whether interest rates go up or down. However, some Fed officials assertain that food and energy pressures can’t be ignored, because even the expectation of inflation by consumers and businesses can lead to real inflation. Even with the Fed becoming more open in dialogue with the media it seems that people are starting to lose some faith in the organisation.
And Americans aren’t the only ones. The disappointing first quarter U.S. growth numbers Thursday were followed by a sell-off of U.S. dollars. So even as all hell broke loose in the eurozone over a potential Greek default, the euro made gains against the dollar.
Is this the start of the US$ becoming out of favour as the world’s reserve currency.