Will the US default

Day six of the partial US Government shutdown and there still seems to be no imminent solution to the crisis. There were some very worrying comments over the weekend with US house speaker Boehner quoted as saying, “the path we are on is default” and adding, “the votes are not in the House to pass a clean debt limit… the president is risking default by not having a conversation with us”.

The US treasury secretary summed up the market thoughts, saying, “Congress is playing with fire”. We all know that there is one common theme the markets do not like and that is uncertainty so with that in mind I’m expecting the ‘risk’ trade to remain under pressure.

In other news, The World Bank cut their growth forecasts for most of Asia, with a further reduction to the Chinese 2013 GDP projection from 7.7% to 7.5%. The New Zealand Finance Minister reiterated his stance on the NZD, saying the strong currency was a headwind for exporters.

Today’s data calendar is rather bleak, with the US shutdown preventing key data releases and the market focus this week likely to be on the FOMC minutes on Wednesday where we’ll get to see just how tight the no taper call was – as suggested by the Fed’s Bullard. Expectations for US tapering are now being pushed back to December or early 2014 as the US Government shutdown will now have serious ramifications on the economic recovery.

EUR/USD

Supports 1.3535-1.3505-1.3455  | Resistance 1.3645-1.3675-1.3715

USD/JPY

Supports 96.85-96.60-95.80   | Resistance 97.45-97.90-98.30

GBP/USD

Supports 1.6000-1.5975-1.5950  | Resistance 1.6100-1.6150-1.6255