Sunday is still alive with USA news about a possible government shut down. Plenty of folks have an opinion on how improper such a threat is. Yet, Friday closed on a high favouring the USD slightly in forex markets. The EUR/USD hit a high of 1.3564 in which the EUR was favoured. On Friday the rate was down to 1.3451 providing a higher value for the USD. Traders are responding to the market with hope that the FOMC taper will begin and the debt ceiling will be raised. One article states the debate is over, but is it really when the USA news channels are still talking about a threat of shutdown on Monday?
Government Shutdown Threats and Forex Reaction
Two things on Friday made the USD gain a little of what it lost. The first was an announcement that the FOMC tapers might happen in 2013, but the real issue is whether the economy becomes stronger. Things like ObamaCare and the debt-ceiling are making the economy appear weaker. This is causing dissention in the government and therefore the forex market is reacting to this negative economic outlook. The taper will not happen no matter what officials say until they feel the economy is in a better position. For the debt-ceiling issue Republicans have relented a little amid negative news that they are making unreasonable demands including shutting down the government. Obama and Democrats say it is extortion that the Republicans are using by holding off on raising the debt ceiling. The thing is the Republicans will raise it in the end, but they are trying to stop ObamaCare and other issues that are going to make the government situation worse, at least according to Republican spokes people.
For forex it has just served as another way for the USD to lose money all week, until a Friday announcement stated a decision would be made. Traders are mostly not alarmed by the impending crisis and government shutdown. Most Americans are not paying much attention other than to shake their heads at such childish bashing in the news and with a threat of government stoppage.
The Week Ahead in Forex
Plenty of things are up-coming as September closes on Monday besides those issues in the USA. German data ended with a positive note, but it was not as strong as many hoped. A lot of focus in forex is on the ECB meeting and Draghi press conference that is coming up next week.
The first week of October is filled with a variety of economic reports from all over the world too. Chinese data was released Monday helping to set the Asia-Pacific market, which will also help to determine how other markets like the European and USA markets open in the next 18 hours. Australia is in a precarious position, but the Chinese data is more than likely going to make it stronger.
Forex for Australia’s dollar is often dependent on what China has to say since both countries are very important partners in trade.