How to Trade the Fed's Easy Money Plan
With the Federal Reserve vowing that interest rates will stay low through 2014, this strategist sees a risk-on trade.
The dollar took a hit when the Federal Reserve said it would keep interest rates near zero for longer than investors expected. And the risk-on mood that followed will likely last, says Amelia Bourdeau, director of foreign exchange at Westpac Institutional Bank.
"I'd like to continue focusing on the commodity currencies and playing this Fed theme ahead," she told CNBC's Melissa Lee.
Bourdeau thinks the European Central Bank will cut interest rates at the beginning of February, and then conduct a three-year liquidity option in late February, which should support riskier currencies like those from commodity-exporting countries.
At the same time, she thinks there is potential for more quantitative easing in Britain, where new GDP data points to more economic weakness.
So Bourdeau wants to sell the pound against the New Zealand dollar. She would enter the trade around 1.9200 and look for a move to 1.8700 with a stop at 1.9400.
You can watch the discussion on the video.
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