cjct

Trading ERO This Week

While I do agree that there's nothing kosher about the Twin Deficits, as currencies are all relative I think that the US will come out of this downturn six months earlier than the eurozone because it entered it six months earlier. As to inflation, I think it's hard to imagine that inflation will be a problem even in an environment where the Fed continues to increase the money supply to fight deleveraging by ever financial institution. Deflation is likely to win out as the de-leveraging process continues to play out. As we can see by the recent liquidity injections, the Fed cannot add enough money to the system to prevent widespread asset deflation. Due to the characteristics of the fractional-reserve system, risk-aversion (deleveraging) can offset the central banks attempts to inflate our way out of this problem.

Trading ERO This Week

Why not use securities like FXA or DRR to trade the USD/EUR, they're much more liquid. But as to your willingess to short the dollar, I don't think that's wise in the risk-averse environment where Treasuries are king.