This week, Bernanke stepped up his support for the greenback during a conference in Spain and a class day speech at Harvard's graduation ceremony. Stating "significant concern" over the falling dollar's impact on inflation, Bernanke made it clear that the Fed is done cutting rates. His remarks sparked a sharp sell off in bonds and commodities, with crude falling about $8 and gold falling about $30. However, all of Bernanke's efforts became undone overnight when Trichet of the ECB explicitly opened the possibility of a rate hike during the ECB's next meeting in July. The dramatic reversal is evident in the charts of EUR/USD and crude below. This is truly: in your face. The Fed might as well stop talking about holding/raising rates because we are about to see Credit Crisis Part II, while the housing market continues to derail in a slow motion train wreck.
EUR/USD
Crude
Below is a three-year chart of the USD index. Do you see the dollar rally everyone's been talking about?
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