The market reaction to headlines about potential compromise and Boehner backing off the debt ceiling are a good example of what will likely happen when a deal is eventually reached. Unless the deal comes like a bolt out of the blue (rare with so many leaks in Washington) or on the weekend, there will be a chance to chase the headlines.
The biggest USD gains were against CHF and JPY — the safe haven currencies. Expect that to continue. Since last Wednesday, when a shutdown became a real threat, USD/JPY is down 1.75%, or 1.60 pips. Even before that, worries about the October Congressional hurdles took a bite out of the pair.
A best case scenario is a deal that funds the government for at least six months (hopefully a year) and pushes back the debt ceiling at least as long. That’s the kind of deal that would put USD/JPY on a path to 100.
My main worry on the downside at the moment is that that Democrats refuse to negotiate and go for total victory.
The biggest USD gains were against CHF and JPY — the safe haven currencies. Expect that to continue. Since last Wednesday, when a shutdown became a real threat, USD/JPY is down 1.75%, or 1.60 pips. Even before that, worries about the October Congressional hurdles took a bite out of the pair.
A best case scenario is a deal that funds the government for at least six months (hopefully a year) and pushes back the debt ceiling at least as long. That’s the kind of deal that would put USD/JPY on a path to 100.
My main worry on the downside at the moment is that that Democrats refuse to negotiate and go for total victory.