15 Oct 2013
Senate meeting postponed until Tuesday, markets keep pricing in a solution
FXstreet.com (Barcelona) - Judging by the price activity across varies risk assets, broad-based consensus appears to be that a U.S. default will be 'logically' averted, and as a result, a thin market has been busy pricing in a 'can kicking' outcome.
While the problem of the U.S. debt ceiling raise has not reached a favourable resolution just yet, the rise in the Australian Dollar and the S&P 500 - hang by hand with other US benchmark indexes - coupled with a cheaper Yen across the board, is an indication of a market pricing in a solution by the deadline. According to bank sources, volumes have been very low - today was Columbus day - with sporadic liquidity as traders are simply 'quoting and covering flows' a HF source said.
While pricing in a positive outcome on the assumption of 'too risky to let it happen' seems to have been a profitable strategy, especially as we near the debt ceiling deadline on Oct 17, traders should continue to avoid playing any asset class with tight stops since moves are still determined on a headline-by-headline basis.
Earlier on the day, Politico wrote: "In a furious round of last-ditch negotiations, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell were discussing a proposal to reopen the government until Jan. 15 and extend the national debt limit until Feb. 7. Several people familiar with the matter expected that a deal could be announced Monday, though its prospects in the GOP-led House are far from certain."
Later on, we learnt that a meeting between Obama and Congressional leaders was postponed to allow for further talks, a headline being perceived as positive, yet just minutes ago, CNN and other mainstream media sources just confirmed, citing a GOP aide, that the Senate meeting has been postponed until tomorrow 11 am local time.
While the problem of the U.S. debt ceiling raise has not reached a favourable resolution just yet, the rise in the Australian Dollar and the S&P 500 - hang by hand with other US benchmark indexes - coupled with a cheaper Yen across the board, is an indication of a market pricing in a solution by the deadline. According to bank sources, volumes have been very low - today was Columbus day - with sporadic liquidity as traders are simply 'quoting and covering flows' a HF source said.
While pricing in a positive outcome on the assumption of 'too risky to let it happen' seems to have been a profitable strategy, especially as we near the debt ceiling deadline on Oct 17, traders should continue to avoid playing any asset class with tight stops since moves are still determined on a headline-by-headline basis.
Earlier on the day, Politico wrote: "In a furious round of last-ditch negotiations, Senate Majority Leader Harry Reid and Minority Leader Mitch McConnell were discussing a proposal to reopen the government until Jan. 15 and extend the national debt limit until Feb. 7. Several people familiar with the matter expected that a deal could be announced Monday, though its prospects in the GOP-led House are far from certain."
Later on, we learnt that a meeting between Obama and Congressional leaders was postponed to allow for further talks, a headline being perceived as positive, yet just minutes ago, CNN and other mainstream media sources just confirmed, citing a GOP aide, that the Senate meeting has been postponed until tomorrow 11 am local time.