euro/dollar
Hi tyoung,
Do you really believe that deflation is simply a monetary phenomonon? If it were then Japan would not be caught in a deflationaly spiral given interest rates at zero and lots of cash sloshing around. The US is suffering form excess supply and this is acting as a powerful drag on pricing leverage. The Fed is doing its best to stimulate demand via rate cuts, but it is also active in buying Treasuries and despite these activities, the Fed itself believes that disinflation (leading to deflation) is emerging as a serious threat.
Despite this, with the US set to pursue a reflationary economic policy, the $USD still looks vulnerable.
Caveat