The Australian dollar “Aussie” has moved back to parity with USD in a sign of things to come. The markets have been on edge for some time due to the Euro debt crisis but are looking for a “Santa Claus” rally into the close of the year. With the EU Finance Minister meeting taking place today, confidence could be restored quickly.
One thing to consider though when looking at the Aussie is that they are closely tied to China economically and raw materials, which they export. As commodity inflation continues to rise, the Aussie dollar will benefit.
While everyone Central banker around the globe will shout that inflation is not a problem, commodity prices tell a different story. So the Aussie dollar looks poised to rise further , as carry traders buy Aussies for the interest they receive on the “hidden inflation story”.
Potential price target of 1.0250 by the end of the week.