020 7898 0500The US dollar bounced back on its recent losses throughout yesterday as a deal to raise the debt ceiling became ever more likely with the Senate approving a cross party deal to end the government shutdown. Overnight, this deal became a reality with the House of Representatives approving the accord with hours to spare to lift the limit on how much money the government can borrow and henceforth meaning the US Government will avoid defaulting on its debt for the first time in history. Whilst a deal was struck, the underlining issues which caused the government to shut down still remain with a huge disparity between the two parties on where deficit cuts should be made. Furthermore, the deal was only a short term solution and the parties have merely agreed to kick the can down the road with the deficit cuts due to be discussed by December 13th, the US Government set to shut down once more on January 15th if a new deal has not been made and the debt ceiling raised until only February 7th – this means, come the New Year, we could be in for a repeat of what we just experienced over the past few weeks! The last two weeks is projected to have wiped $24 billion off the US economy and resultantly, leading organisations have rapidly been downgrading short term growth forecasts for the US. In other news, the Beige Book which comments on the state of the local economies from all 12 Federal Reserve Banks suggested the economy was still expanding at a “modest to moderate” pace. Today holds some further data of interest, with firstly the weekly unemployment’s claims figures, followed later by the Philadelphia manufacturing index. Get in touch with your trader now to see how the latest developments could affect the US dollar going forwards.
