Thursday, November 6, 2008

Commodities: US Dollar Strengthens

As Europe is starting to be hit hard by a weakening economy, central banks dropped lending rates in hopes of spurring investment. In response, the U.S. dollar strengthened today against the British pound and the euro. That won't keep the collapse of the U.S dollar from happening.

While the move by the European Central Bank of cutting its benchmark rate by 50 basis points was as expected, dropping it to 3.25 percent, the Bank of England shocked investors with an extraordinary cut of 150 points, bringing rates down to 3 percent. The Swiss National Bank dropped rates by 50 points to 2 percent.

[Most Recent Exchange Rate from]

ECB President Jean-Claude Trichet said in a Reuters Television interview that a cut next month is a possibility, depending on the circumstances faced.

"I didn't exclude a further cut in December, depending on the data, depending on the information that will be gathered, depending on the projections that we could examine at the time, including of course the staff projections."

Analyst believe the rates for the ECB will drop to 2.5 percent by the middle of 2009.

Trichet added that while it looks like inflation will fall below 2 percent for 2009 for the Euro zone, oil and commodity prices will determine if that will be the reality. In October inflation dropped to 3.2 percent from its high of 4.0 percent during the summer months.

The European Commission isn't expecting any economic growth in the region over the next year.

[Most Recent Exchange Rate from]

All the ups and downs of the U.S. dollar, and the press alerting us to when it rises, won't keep the greenback for collapsing sometime soon - the U.S. dollar could collapse in 2009.

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