
The news that no agreement
could be reached politically in the US to avert a government shutdown
was apparently taken quite well in Asian markets this morning. However, the
European market, represented by Frankfurt initially, opened about one hour
before the time of writing this report, and the Greenback is now “going to hell
in a wheelbarrow”, to coin a phrase.
Where this will end is
impossible to say. The remarks of Mr. Bernanke after the last FOMC
meeting, when he specifically alluded to the risks inherent in just this
eventuality, have perhaps made it a greater factor in market behaviour than
would otherwise have been the case. In any event, it has well and truly placed
tapering and the whole question of Quantitative Easing (QE) on the back burner.
Europe gives a good lead
indication as to the direction of world markets but we still have the US to come. Will
the dollar weakness be accelerated when the US comes to the table, or will
there be profit taking?
The government shutdown will
not last. The only real question is the amount of damage it will do to the
economy, and our guess is that this will be transient at worst. In the short term one real casualty is likely to be the otherwise closely watched Non-Farm Payrolls report, which is due out on Friday. This will, most likely, not appear as a result of the government shutdown.
wonderful analysis thanks for this.
ReplyDelete