The euro has hit a record peak against the US dollar on expectations of higher interest rates in the euro zone.While the Europeans are aiming for inflation lower than 2%, the U.S. has growing inflation already over 4%. Everything that is imported is already costing more, especially oil.
It rose as high as $1.6019 as weak US housing market data underscored fears over the health of the US economy.
The euro has rallied in recent months and Tuesday's peak came as European central
raised the prospect of higher rates to control inflation.
Higher interest rates make bank deposits and other euro-denominated investments more attractive.
Most other central banks are cutting the cost of borrowing as they look to limit the impact of a global economic slowdown. [Snip]
"Interest rate differentials are really favouring the euro right now," said Camilla Sutton, a currency strategist at Scotia Capital in Toronto.
European Central Bank governing council member Christian Noyer said the bank would do what was needed to bring inflation back to its target of just below 2%, adding it would move rates if needed.
The increase in the cost of living will cause pressure to raise labor rates, also increasing inflation.
When a Banker or government economist says that the financial problems are almost over, they are whistling in the wind.