The US dollar is in terminal decline, mainly due to the Fed's mandate to fight off any risk of
the US economy falling into recession due to the subprime crisis and credit crunch. It also
has a mandate to fight off inflation but not if this risks the US ecomomy heading towards recession.
The Fed has already gone mad with interest rate cuts doing full percentage rate cuts.
Whether the US dollar will ever reverse from this steady decline is open to debate.
Some of the causes in the steady upward price in a barrel of oil is due to the steady decline in
the US dollar - as oil is always priced in US dollars.
The European Central Bank has only one mandate namely to control inflation - if the cost of goods
is going up then the ECB is likely to raise interest rates to fight it. If european companies feel
the pinch because of it - the ECB's answer is tough !!
So the Euro steadily appreciates in value but at a reduced rate, as GDP growth in the Euro zone
is slow and mutted.
The Eastern European currencies of Poland, the Czech Republic, etc have been steadily increasing
in value against Sterling, the dollar and even ( in some cases ) the Euro due to double digit
GDP growth in the Emerging Markets, that shows few signs of slowing down.
Believe it or not the British pound has been falling steadily against a basket of other european
currencies over the past 3 years, even though sterling has appreciated against the US dollar
to hover around £1 = $2 US dollars mark.
The Bank of England - has the same mandates as the Fed Reserve with the priority being to
stave off any risk of recession. Therefore UK interest rates have been falling gradually ( but never
more than quarter percentage cuts )
The upshot of all this is - that all the hundreds of thousends of Poles who migrated to the UK
when Poland joined the EU on 1st May 2004 - when the British pound was worth 7 Polish Zloty.
Now find the same British pound is only worth 4.5 Polish Zloty.
