Eurozone inflation measured 3.7% year-on-year in May, the highest rate for 16 years, reports Bloomberg. This increases the likelihood of an interest rate hike by the ECB in July, putting more downward pressure on the US dollar.

Money Morning’s William Patalon III discusses how rising inflation is dominating the news on both sides of the Atlantic:

Undoubtedly, a universal theme is emerging at the Fed and other world central banks: Inflation, Inflation, Inflation.

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Can you talk a currency into gaining value? It seems Fed Chief Ben Bernanke and European Central (ECB) President Trichet think so. They’ve been telling anyone who will listen how serious they are about fighting the inflation monster that would cheapen their currencies.

 In the currency market, the dollar rallied against the euro. Late Thursday, the euro was trading at $1.5421 vs. $1.5548 on Wednesday. The buck was supported by better-than-expected retail sales, which boosted expectations for a Fed rate hike.

There is a 95% chance that the US economy will enter a recession, according to a report in BusinessWeek magazine.

Jennifer Yousfi in Money Morning gives some background and examines strategies for recession proof investing:

U.S. Federal Reserve policymakers cut the benchmark interest rate by less-than-expected three-quarters of a percentage point at their last meeting, a move that was designed to energize a badly flagging economy without causing inflation to spike or exacerbating the greenback’s decline.

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Trichet talks tough! Kohn sends warnings… The currencies bounce back! Will the BLS create ghost jobs?