European Inflation Soars in May, High Rates Will Keep Dollar Weak

Euro area inflation rose to 3.7% in May, its highest level in 16 years, after continued pressure from stratospheric commodity prices fuelled the sharpest price expansion since June of 1992.

ECB president Jean Paul Trichet has already signalled his willingness to raise rates this July to forestall a possible wage-price spiral, and this most recent report will likely make such a move more likely. The Euro climbed 0.6% on the news to $1.5467.

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