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S&P rise to 1600 requisite on steadfast US growth, USD wanes across the board

FXstreet.com (Barcelona) - In light of the recent run-up in US equities, it bears the question if such an influx in returns is stable or additional growth is possible. Indeed, U.S. economic growth will have to accelerate to “ridiculously strong levels” to justify any advance for the Standard & Poor’s 500 Index (SPX) above the 1,600 level, wrote Jim O’Neill, chairman of Goldman Sachs Asset Management.

After already gaining 9.6% this year, the S&P 500 is trading at 1,563.23, less than 2 points from a record and within 3% of 1,600. According to O’Neill, an estimate of 1,575 for the U.S. equity benchmark this year. The world’s biggest economy is forecast to grow 1.9% in 2013 and 2.7% next year. “In order to justify the S&P above 1,600, we’d have to see growth expectations go to something like 4% and beyond,” O’Neill said in a recent interview. “I don’t see persistent upside from those kind of levels without some more evidence that the economy would be growing by ridiculously strong levels.” The S&P 500, which has more than doubled from its bottom in 2009, will trade in a range between 1,500 and 1,600, O’Neill said, without specifying a time period.

Despite this recent growth, the USD index found itself in retreat after 6 straight weeks of advancement. This in turn has helped hurt most USD crosses as the EUR/USD found itself advancing today at weekly highs at 1.3108 Friday. Additionally, the USD/JPY found itself in a freefall as the pair lost its grip on the 96.00 level and recently settled at 95.51 during US trading.

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