26 Sep 2013
Debt ceiling circus sign to keep selling USD?
FXstreet.com (Barcelona) - The US Dollar was one of the worst performer currencies on Wednesday, as the political gridlock saga between Democrats and Republicans to raise the debt ceiling in the US.
Another fiscal fiasco?
Commenting on the latest from Washington, Victoria Craig from Fox Business notes: "The Democratic-controlled legislative body is expected to take up a House-passed resolution to keep the government funded through December 15." However, the legislation, as Craig says "is essentially dead-on-arrival thanks to a provision inserted by House Republicans to fully repeal the Affordable Care Act, President Barack Obama’s hallmark accomplishment."
As Craig dds: "The Senate is likely to scrap the House-passed version of the continuing resolution and replace it with its own version to send back to the House, which must either pass the Senate’s new version, or revise it to send back to the Senate by the end of the fiscal year on September 30." If the House fails to reach an agreement, it risks shutting down operations.
USD selling main theme
Investors and traders alike are starting to perceive an arduous road until kicking the can further down the road on the debt ceiling. Failure to do so, as Treasury Secretary Jack Lew said today, "will exhaust borrowing capacity by October 17."
Despite few doubt an scenario in which the US economy officially defaults will occur - catastrophic for risk assets - , players are starting to play the 'defensive cards' towards the USD, despite, as said, an 11th hour favourable resolution is a done deal.
According to Adam Button, Editor at Forexlive: "The dollar is the dog of US trading and it will get worse as the government edges closer to a shutdown. The tone about the debt ceiling in Congress remains as poisonous as ever and Senator Ted Cruzengages in a 21-hour marathon speech, reading ‘Green Eggs and Ham’ and taking US politics even further down the drain."
Fed taper in Oct dubious at best
By connecting the dots, market participants are also shaping up another assumption, that is, the Federal Reserve is unlikely to start its QE exit strategy by October as long as uncertainty over the debt ceiling remains and data does not improve.
As Bruce Clark from IFR Markets reports: "Economic data this week (Consumer Confidence, Durable Goods) hasn't been very impressive, bank shares are under pressure due to regulatory and legal challenges, retail giant Walmart warned of slowing sales and widespread health care changes take effect Oct 1."
Clark adds: "Word is the House will offer up a stop-gap kick of the can in the form of a one week CR so the government doesn't shut down on Tuesday, ostensibly so that negotiations can continue. Only neither side is negotiating, just posturing." Clark expands by saying that "this fight isn't even the main event", one that comes later next month over the debt ceiling. "This is no way to run a USD 14 trln dollar economy and Mr Bernanke knows it" Clark notes.
Another fiscal fiasco?
Commenting on the latest from Washington, Victoria Craig from Fox Business notes: "The Democratic-controlled legislative body is expected to take up a House-passed resolution to keep the government funded through December 15." However, the legislation, as Craig says "is essentially dead-on-arrival thanks to a provision inserted by House Republicans to fully repeal the Affordable Care Act, President Barack Obama’s hallmark accomplishment."
As Craig dds: "The Senate is likely to scrap the House-passed version of the continuing resolution and replace it with its own version to send back to the House, which must either pass the Senate’s new version, or revise it to send back to the Senate by the end of the fiscal year on September 30." If the House fails to reach an agreement, it risks shutting down operations.
USD selling main theme
Investors and traders alike are starting to perceive an arduous road until kicking the can further down the road on the debt ceiling. Failure to do so, as Treasury Secretary Jack Lew said today, "will exhaust borrowing capacity by October 17."
Despite few doubt an scenario in which the US economy officially defaults will occur - catastrophic for risk assets - , players are starting to play the 'defensive cards' towards the USD, despite, as said, an 11th hour favourable resolution is a done deal.
According to Adam Button, Editor at Forexlive: "The dollar is the dog of US trading and it will get worse as the government edges closer to a shutdown. The tone about the debt ceiling in Congress remains as poisonous as ever and Senator Ted Cruzengages in a 21-hour marathon speech, reading ‘Green Eggs and Ham’ and taking US politics even further down the drain."
Fed taper in Oct dubious at best
By connecting the dots, market participants are also shaping up another assumption, that is, the Federal Reserve is unlikely to start its QE exit strategy by October as long as uncertainty over the debt ceiling remains and data does not improve.
As Bruce Clark from IFR Markets reports: "Economic data this week (Consumer Confidence, Durable Goods) hasn't been very impressive, bank shares are under pressure due to regulatory and legal challenges, retail giant Walmart warned of slowing sales and widespread health care changes take effect Oct 1."
Clark adds: "Word is the House will offer up a stop-gap kick of the can in the form of a one week CR so the government doesn't shut down on Tuesday, ostensibly so that negotiations can continue. Only neither side is negotiating, just posturing." Clark expands by saying that "this fight isn't even the main event", one that comes later next month over the debt ceiling. "This is no way to run a USD 14 trln dollar economy and Mr Bernanke knows it" Clark notes.