Director of FX Advisory Services at HiFX
Post date: Tuesday, 1st October 2013
Chris Towner, director of FX advisory services at foreign currency specialists HiFX, comments on the US shutdown.
Considering that GBP/USD was trading in the 1.48s in July, we have seen this currency pair bounce back over the last few months to touch 1.6250. This is due to a combination of the buoyant economic data stemming from the UK and the decision by the FOMC not to taper their asset purchase programme.
However, more recently we have seen the partial shutdown in the US put pressure on the US dollar as Congress fails to agree on the budget. Then, by 17 October the US Treasury will require Congress permission to increase the debt ceiling as they will run out of available funds.
Politics at the moment is intense and the longer a stalemate continues, the more intense the situation will become. Saying that, people will get frustrated if national parks are closed or, in the case of some government workers, they're unable to go to work - this should act as a catalyst for a compromise. The spotlight is currently on the US.
GBP/USD has climbed to 1.6250, levels not seen for nine months. The longer things stand unresolved, the more pressure this will put on the US dollar.