22 Oct 2013
Flash: New Year dollars – JP Morgan
FXstreet.com (London) - Research teams at JP Morgan said this month’s Washington wars raise understandable questions about enduring damage to the dollar as a reserve currency, since the political process creates non-zero default risk in an asset which should be default-free. However, they said the damage to the dollar therefore looks more cyclical than structural.
Key Quotes:
“…the damage to the dollar therefore looks more cyclical than structural in that is suppresses US rates for longer”.
“But with the US economy unlikely to slow much or for long, US rates should move towards 2.7% by year-end, which in turn limits USD downside into the new year”.
“We doubt the December 2013/January 2014 debates will be as tense as the October one, and the debt ceiling issue has been deferred effectively until July 2014 due to Treasury’s use of extraordinary measures”.
“Thus round five of the budget disputes under a divided Congress (the first three were the April 2011 near-shutdown, August 2011 debt ceiling and December 2012 fiscal cliff) could prove even less impactful on global markets than the fourth round in this October”.
Key Quotes:
“…the damage to the dollar therefore looks more cyclical than structural in that is suppresses US rates for longer”.
“But with the US economy unlikely to slow much or for long, US rates should move towards 2.7% by year-end, which in turn limits USD downside into the new year”.
“We doubt the December 2013/January 2014 debates will be as tense as the October one, and the debt ceiling issue has been deferred effectively until July 2014 due to Treasury’s use of extraordinary measures”.
“Thus round five of the budget disputes under a divided Congress (the first three were the April 2011 near-shutdown, August 2011 debt ceiling and December 2012 fiscal cliff) could prove even less impactful on global markets than the fourth round in this October”.