Australian Dollar Climbs to New 18 Year High, Canadian Dollar at a 31 Year High (page 2 of 2)

Less than six months ago, many traders could not fathom seeing USD/CAD below parity. Now, it is time to think about whether the Australian dollar will also hit parity against the US dollar. There was no economic data released out of any of the three countries overnight. Instead, the rally was fueled by the continual rise in commodity prices. Gold prices hit a 28 year high while platinum prices rose to an all-time high. Oil prices dropped, but it remains above $80 a barrel. Unless commodity prices reverse significantly, there is nothing to stop these pairs from moving higher.

British Pound Pares Gains after Sharp Rise on Friday

After coming within 5 pips of 2.05 at the onset of the European trading session, the British pound reversed course to end the day lower against the US dollar. Economic data was slightly weaker than expected with consumer credit, mortgage approvals and manufacturing PMI easing. Like companies in the Eurozone, companies in the UK are also being hurt by the recent strength of the British pound. Last Friday, Tate and Lyle PLC warned that earnings could be weak over the next six months as a direct result of the dollar's weakness against the British pound. If economic data continues to surprise to the downside this week, expectations for a surprise rate cut on Thursday will grow. Prime Minister Brown said this morning that they will take no risks with the economy. After harsh criticism last month on his response to the Northern Rock problems, Bank of England King probably feels the same way.

Carry Trades Shrug Off Stronger Japanese Economic Data

Carry trades have performed extremely well today thanks to the sharp rise in US equities. Whether the rally continues will be dependent upon how much further the Dow can rise. Although it can be said that risk appetite is back, for many people the rise may still seem too good to be true. For this reason, we could see further gains as the market completely shrugs off stronger Japanese economic data. The market was looking for the Quarterly Tankan report to decline but instead it remained unchanged at 23. Labor cash earnings also rose for the first time in nine months. Unfortunately the BoJ can not do anything about this given the continual drop in consumer prices.