Aussie boosted by US hopes

The Australian dollar has gained ground versus the US dollar over hopes of a short-term deal in the US.

There is a possibility of a deal being struck between the Democrats and Republicans, which could give both parties a little more time to reach an agreement. John Boehner of the Republican Party has suggested raising the debt ceiling for six weeks, and this could allow more breathing space to find a long-term solution. However, traders have been buying the Australian dollar as they fear the US may be downgraded, as it was last time it raised the debt ceiling in August 2011.

The Australian and Chinese economies are intertwined through trade. China is releasing economic data over the weekend, and dealers are anticipating positive announcements. The manufacturing industry in China went through a slump in the summer, but is stabilising now. Beijing will report its latest trade balance and money supply figures, and the trade report will give us an indication of the state of domestic demand. If the announcements come in higher than expected we could see AUD/USD head towards the $0.95 mark.

Spot FX AUD/USD chart

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