Forex Analysis: Dollar Strengthens as Fiscal Cliff Negotiations Stall
THE TAKEAWAY: US Dollar ends week higher as Fiscal Cliff disorganization prompts safe haven asset buying.
The US Dollar ended last week stronger against its counterparts as The House of Representatives’ Republican leaders cancelled a vote on John Boehner’s ‘Plan B’ proposal to address the looming “fiscal cliff”. This saw a sharp decline in the S&P 500, forcing the Dollar higher.
The safe haven currency saw some consolidation early this week but rallied into the Christmas holiday as traders grew fearful that US lawmakers would fall short of reaching a budget deal before the year-end. This prompted US President Barack Obama to cut short his holiday in Hawaii and announce an early return to Capitol Hill. This calmed the markets and stoked optimism that a solution would be reached.
Reports that Obama and Boehner had not engaged in discussions again saw US stocks head lower with the Dollar spiking to a weekly high. Ominous comments from Senate Democratic leader Harry Reid warning that the “fiscal cliff” would not be avoided prompted a sell-off on US stock markets and a rally in the greenback. The advance met some resistance however as Congressional leaders announced a meeting with President Obama on the 29th while the House said it would convene on the 30th of December, rekindling hopes for a last-minute accord. Still, the benchmark currency finds itself 0.7 percent higher week-to-date against the majors.
Created Using FXCM Marketscope – Prepared by Christopher Almeida