Euro

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?