$EURUSD The Coming Week
Friday, December 21, 2012
Tweet
For the coming week, anticipate the Greenback to show weakness in its currency valuation, as the ongoing negotiation spells optimism in its fiscal cliffs however, many analysts believe that the US Congress needs to pass legislation before Christmas in order to avert the substantial fiscal tightening which is about to hit the US economy come January 1st.
In addition, the US congress is in recess for the Christmas holiday and will return on the 27th of December; this indicates that President Obama together House Speaker Boehner and the Congress have only four days after Christmas holiday to strike a deal.
Last Thursday night Speaker Boehner dropped a House vote on his so-called Plan B, which included tax hikes for those earning more than USD 1m per year. According to Boehner the vote was dropped as he was not able to get a majority within the Republican Party to support the plan.
Furthermore, the so-called Plan B was never going to pass the Senate in its current form, it is still a blow to the negotiations as it indicates that Boehner does not have the support from the rank-and-file of members of the House. In addition, there is still time to strike a deal which includes a solution to the immediate fiscal cliff for 2013, a framework for spending cuts over the coming decade and an increase of the debt ceiling about to be hit in February/March next year. However, a more likely scenario is that we will get a ‘mini deal’, which bridges the fiscal cliffs but does not tackle the debt ceiling.
Moreover, the ‘mini deal’ is likely to include an extension of the Bush cuts for the majority of the Americans households and indexing the AMT for inflation. It is also possible that it will include an extension of the emergency unemployment benefits, and a ‘doc-fix’ but not an extension of the payrolls tax cuts or Democratic majority and pass the House with unanimous votes from the Democrats and support from the part of the House of Republicans that would like to avert tax hikes for all Americans.
In addition, the deal will definitely ease the immediate fiscal blow to US households but will not raise the debt ceiling or include major spending cuts. Legislation on these issues is delayed until next year, when politicians will start a new round of negotiation ahead of the late February/early March deadline, when the debt ceiling becomes binding. Hence political uncertainty is set to remain high next year.
For the coming week, anticipate the Greenback to show weakness in its currency valuation, as the ongoing negotiation spells optimism in its fiscal cliffs however, many analysts believe that the US Congress needs to pass legislation before Christmas in order to avert the substantial fiscal tightening which is about to hit the US economy come January 1st.
In addition, the US congress is in recess for the Christmas holiday and will return on the 27th of December; this indicates that President Obama together House Speaker Boehner and the Congress have only four days after Christmas holiday to strike a deal.
Last Thursday night Speaker Boehner dropped a House vote on his so-called Plan B, which included tax hikes for those earning more than USD 1m per year. According to Boehner the vote was dropped as he was not able to get a majority within the Republican Party to support the plan.
Furthermore, the so-called Plan B was never going to pass the Senate in its current form, it is still a blow to the negotiations as it indicates that Boehner does not have the support from the rank-and-file of members of the House. In addition, there is still time to strike a deal which includes a solution to the immediate fiscal cliff for 2013, a framework for spending cuts over the coming decade and an increase of the debt ceiling about to be hit in February/March next year. However, a more likely scenario is that we will get a ‘mini deal’, which bridges the fiscal cliffs but does not tackle the debt ceiling.
Moreover, the ‘mini deal’ is likely to include an extension of the Bush cuts for the majority of the Americans households and indexing the AMT for inflation. It is also possible that it will include an extension of the emergency unemployment benefits, and a ‘doc-fix’ but not an extension of the payrolls tax cuts or Democratic majority and pass the House with unanimous votes from the Democrats and support from the part of the House of Republicans that would like to avert tax hikes for all Americans.
In addition, the deal will definitely ease the immediate fiscal blow to US households but will not raise the debt ceiling or include major spending cuts. Legislation on these issues is delayed until next year, when politicians will start a new round of negotiation ahead of the late February/early March deadline, when the debt ceiling becomes binding. Hence political uncertainty is set to remain high next year.
Labels:
