THE Australian dollar-US dollar is still tentatively trading below parity. As one of the few advanced economies to avoid a recession, the Australian economy should benefit from high demand for raw materials, especially from China. Bulls expect the Aussie to break through to parity soon, so it may be a trade for the optimistic. Capital Spreads quotes a spread of $0.9892-$0.9894.
Earlier in the week euro-sterling looked ripe for profit taking. After strong UK GDP figures yesterday, however, sterling is up, and the euro no longer looks so healthy. Tax hikes and government cuts are coming though, so sterling may lose its lustre again. It would seem wise to get in on the euro while it’s cheap. IG Index offers a spread of £0.8780-£0.8782.
For the moment however, the UK economy is bubbling. S&P upgraded their rating on the economy from negative to stable, boosting the pound. That ought to lead to leveraged traders picking up sterling-US dollar in the hope of further falls in the dollar, so it may be a wise bet. If sterling gets past $1.5900, then the next big benchmark is $1.6050. Be wary of chasing the dollar too far down, however. With ongoing uncertainty about what the Fed will do next week, it may yet surprise. ETX Capital quotes a spread of $1.5854-$1.5856.
Indeed the Fed may do a lot. Yesterday the dollar staged something of a fight-back, breaking a month long downwards trend against the yen to push to a high of ¥81.40. It has also been recovering against the Swiss Franc, breaking through a four month long downwards trend. There is also some speculation that the Bank of Japan might try to intervene to push up the Yen. The next target to look for is SFr0.9950 against the Swissie and ¥81.65 against the Yen Spread Co offers spreads on US dollar-Swiss Franc of SFr0.9841 – SFr0.9844 and on US?dollar-yen of ¥81.265–¥81.295.