The antic in Washington DC continue to be market focus there has been little else happening elsewhere giving US politics the perfect timing to be in the global spot light. With the Middle East turned down the temperature to a simmer and European politics and financial crisis taking a break from the headlines speculator remain focused on the theatrics playing out in the US capitol where politicians are doing their best to be favorable headlines and pushing the parties political agenda while everyone knows in the end there will be compromise. The “Tea Party” members which pushes the government in to crisis mode have long been pushed to be background as Democratic and Republic leaders fight it out as President Obama serves are a referee with his own agenda. The US dollar which tumbled to trade under the 80 level last week has been making a steady recovery as a deal come closer. The DX is trading in the green this morning at 80.64 up by 5 pips as lawmakers indicated that they were making headway. While the two sides appeared to fall short of clinching a deal late Tuesday, with the Senate adjourning at 10:08 p.m. local time, reports said Reid and McConnell were close to a deal on a Senate bill that, if passed, would then go to the Republican-led House of Representatives. The Senate was slated to reconvene at noon Wednesday. The abrupt decision to cancel voting on the House plan was a clear sign Republicans didn’t have the votes to approve the bill, which would have opened the government through Dec. 15. The debt limit would have been extended to Feb. 7. Late yesterday Fitch Ratings issued a downgrade watch for US debt. The Fitch warning comes as negotiations on competing plans to raise the U.S.’s borrowing limit and fully reopen the federal government continue. The Treasury Department, which has used extraordinary steps to continue paying its bills for roughly two weeks, says it will exhaust those powers on Thursday.
The recovery of the greenback is weighing on its crosses. The pound tumbled to 1.5970 down by 27 pips ahead of today’s labor figures. The GBP has unfortunately seen two weeks of lackluster economic data, which is offsetting earlier positive reports. PMI climbed to recent highs in all fronts but industrial product took a tumble last week. Traders are also eager to see retail sales number due on Thursday.
News from Europe has been quiet with Greece and Italy dealing with their new budgets, but overall everything remains in neutral. The euro is trading at 1.3512 down 13 points today. Yesterday, confidence indicators for the eurozone were poor but the ZEW sentiment in Germany soared above expectations giving a bit of a bump to the shared currency. There is little of consequence on the calendar today as the ECB deals with the final approval of a banking supervisor which got the final thumbs up yesterday.
Tasmanian currencies were trading in the green this morning as both New Zealand and Australia seem to think that their central banks will soon be raising interest rates. The kiwi is trading at 0.8392 and the Aussie at 0.9525. The Japanese yen declined against the strong US dollar to trade at 98.54.
Today’s calendar is just about bare with CPI numbers in the Eurozone and not much else to distract from US politics.
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