Rally cry for a US revival

The US economy is entering a new, surprise cycle of solid growth, raising the prospect of a lower Australian dollar and Reserve Bank hikes before the year's end.

The upward momentum in the US economy is gaining more traction. In fact, 2013 looks like it will be a year where GDP growth moves to an above trend pace for the first time in six years, where the unemployment rate will slip towards 7 per cent for the first time in over five years and where the budget deficit will narrow sharply as the automatic stabilisers and policy changes kick in.

To be sure, there are a smorgasbord of risks ahead, but the economic data flow and market moves in the early months of 2013 have almost universally surprised on the upside.

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