Dollar Stable as Bernanke Speaks Again
Jun 5th, 2008 | By Doug Casey | Category: US Dollar & Forex TradingIn the currency market, the dollar edged lower against the euro. Late Wednesday, the euro was trading at $1.5435 vs. $1.5434 on Tuesday.
Bernanke gave a speech for the second time in two days yesterday, this time comparing the present situation with the 1970s, another time of rapidly escalating oil prices and inflation in food and other commodities.
Nonetheless, “We see little indication today of the beginnings of a 1970s-style wage-price spiral, in which wages and prices chased each other ever upward,” Bernanke said.
Perhaps what he meant to say was that prices are chasing themselves higher while real wages are actually falling.
“Some indicators of longer-term inflation expectations have risen in recent months, which is a significant concern for the Federal Reserve,” Bernanke said. “We will need to monitor that situation closely.”
Matthew Strauss, senior currency strategist at RBC Capital Markets, analyzed Bernake’s words thusly: “His comments are consistent with [the previous day’s] speech and it seems the Fed is starting to close the door on further rate cuts. However, given the downside risks to growth, we believe it would be premature to price in rate hikes in 2008.”
Well, maybe. But it’s not likely to be too premature, given that the effects of the current oil shock are only beginning to be priced into other markets.
Source: Dollar Stable as Bernanke Speaks Again
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