Dollar

In his most recent speech, Ben Bernanke spoke about the dollar's weakness and its impact on producer and consumer price inflation. Bernanke has moved from focusing entirely on stability and growth to fighting inflation and the dollar decline. Folks such as Martin Feldstein recently said that the US didn't have a strong dollar policy, but it appears as though the Fed may have switched gears to fight inflation, and sees a strong dollar as a means to do so.

Snapshot asks, will the Fed's stance on the dollar continue to push the greenback higher?

The euro may be overvalued, but don't expect it to fall anytime soon. Rising commodity prices have pushed eurozone inflation to a sixteen year high at 3.6% and the European Central Bank remains committed to inflation targeting monetary policy. The ECB recently pushed back against the Bank of England and IMF who claim there is room for rate cuts. On the other side of the Atlantic, recession fears led to aggressive interest rate cuts in the United States. The weak dollar has caused a rise in the price of imports increasing inflation, but also made exports cheaper and more attractive to foreign consumers. The earnings reports from internationally exposed companies in the first quarter of 2008 cited strong foreign demand and better than expected earnings.

Snapshot asks, where will the euro be at the end of 2008?