Dollar drops to historic low while crude oil reverses to new high

Today the U.S. Dollar sank to an historic low, edging below the former bottom of April 22nd. The dollar had been in a bullish recovery after April 22nd until the Federal Reserve refused to raise rates at their June 25th meeting. They had earlier said they would defend the dollar. Instead, the dollar plunged back to its overall bearish trend channel originating last October.

While the dollar was sinking following the Fed's last meeting, crude oil rose 9% exceeding its July 3rd high for a new historic high of 147.27. Not surprisingly, wholesale inflation rose 9.2% over the past 12 months for the fastest increase in 27 years, according to the Labor Department.

Needless to say, the current Fed policy (rhetoric for defending the dollar but no concrete action) is not sustainable. The high price of gasoline is squeezing the economy and threatening major industries (e.g., the airlines). The Fed could solve both its growth and price stability mandates by raising rates.