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7 Oct 2013
Both parties continue trench digging in the US debt ceiling war
FXstreet.com (London) - The dollar has slid overnight, with government shutdown fears weighing on Asian markets.
The partial government shutdown has now reached its second week, with neither side of the aisle showing much sign of compromise. Congress is now approaching the October 17 deadline to increase the debt ceiling or risk default.
While much of the stalling running up to the government shutdown deadline had been pinned on the Republican Tea Party faction, the majority of the GOP has united against any debt ceiling raise without budget cuts.
Speaking yesterday, Speaker John Boehner ruled out any House Republican support of a bill raising the federal government's borrowing limit without new spending cuts from the Obama administration, saying that the White House risks aUS default by refusing.
When asked in an ABC interview if the US would default on debt payments unless Democrats and President Obama made concessions, Boehner responded: “"That's the path we're on."
So far, the Democrats have flat out refused to concede any ground as the GOP attempts to tie any raise in the debt ceiling to negotiations about a cut in government spending, with or without Obamacare.
A number of centrist Republicans have already indicated that they would be prepared to support a “clean bill” that would end the deadlock without defunding the Affordable Care Act. However, on the other side of the party, Boehner will be set for an unremitting onslaught from Tea Party Republicans, such as Ted Cruz, Marco Rubio and Rand Paul if he does not push for a delay to Obamacare.
Bad news is good news
While the first week of the shutdown was characterised by market bullishness, confident that the deadlock would be broken soon, that optimism is now wearing thin. USD/JPY continues to slide this morning on debt ceiling fears, down 0.31 percent to JPY96.9150.
But, as is the nature of the broken post-QE markets, continued debt ceiling concerns could mean support for equity and risk markets. The longer the US government remains in deadlock, the more certain it becomes that any tapering of the Fed’s asset purchase programme will be kicked into 2014, with cheap money outweighing short-term GDP drag in the eyes of many equity bulls.
The partial government shutdown has now reached its second week, with neither side of the aisle showing much sign of compromise. Congress is now approaching the October 17 deadline to increase the debt ceiling or risk default.
While much of the stalling running up to the government shutdown deadline had been pinned on the Republican Tea Party faction, the majority of the GOP has united against any debt ceiling raise without budget cuts.
Speaking yesterday, Speaker John Boehner ruled out any House Republican support of a bill raising the federal government's borrowing limit without new spending cuts from the Obama administration, saying that the White House risks aUS default by refusing.
When asked in an ABC interview if the US would default on debt payments unless Democrats and President Obama made concessions, Boehner responded: “"That's the path we're on."
So far, the Democrats have flat out refused to concede any ground as the GOP attempts to tie any raise in the debt ceiling to negotiations about a cut in government spending, with or without Obamacare.
A number of centrist Republicans have already indicated that they would be prepared to support a “clean bill” that would end the deadlock without defunding the Affordable Care Act. However, on the other side of the party, Boehner will be set for an unremitting onslaught from Tea Party Republicans, such as Ted Cruz, Marco Rubio and Rand Paul if he does not push for a delay to Obamacare.
Bad news is good news
While the first week of the shutdown was characterised by market bullishness, confident that the deadlock would be broken soon, that optimism is now wearing thin. USD/JPY continues to slide this morning on debt ceiling fears, down 0.31 percent to JPY96.9150.
But, as is the nature of the broken post-QE markets, continued debt ceiling concerns could mean support for equity and risk markets. The longer the US government remains in deadlock, the more certain it becomes that any tapering of the Fed’s asset purchase programme will be kicked into 2014, with cheap money outweighing short-term GDP drag in the eyes of many equity bulls.