FYI | Oct 08 2010
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David Morrison, GFT's CFD market analyst reports:
The stunning and unexpected surge in the employment change number has seen the Aussie dollar soar today, sending it tantalisingly close to parity with the US dollar. The news now underpins the expectation that the RBA will begin raising the Cash Rate once again in early November, after surprising investors earlier in the week and holding fire. However, the release of the CPI at the end of this month will be the decider.
Meanwhile, the US dollar continues to take a pummelling against just about every other currency. Investors are convinced that the Fed will announce QE2 in early November and this has led to soaring levels for everything priced in dollars. Naturally, equities, precious metals and oil are all seeing the benefit. Despite unresolved sovereign debt issues, including another downgrade for Ireland, the euro/USD has pushed above 1.40 again and Goldman Sachs reckons it’s going much higher. Countering this is the feeling that the single currency is overbought, and short interest in the dollar suggests that a sharp reversal could be on the cards. A potential trigger could come from the US third quarter earnings season which has just got underway. Any disappointment here could see a rush out of risk with investors piling back in to the relative safety of the dollar.
The above views are the author's, not FNArena's (see our disclaimer).
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