Merely two days until the US deadline to raise the debt ceiling in order for the US to meet its debt obligations, the economic goals are clear and agreed upon. US must not default; the US must if possible retain its AAA credit rating. Both the Democrats and Republicans agree. The issue? Political ideals that are entwined with economic safeguarding. To make matter complicated, the election next year paints a bulls eye on the White House as there are any plans that have been put forward that would ensure that the problems of the US debt would be re-visited at this time. The White House for obvious reasons would most likely want to avoid this, the Republicans would probably like nothing better than to preach the failure of the current administration of dealing with the US Debt issue (whether this is accurate or not) whilst President Obama is campaigning for the next term.
The Republicans are holding steadfast onto their ideals that the budgets moving forward should not include new revenue streams and that spending should be cut. Democrats are arguing that to decrease spending is to jeopardize growth and new tax streams should play its part in austerity and reducing the debt level.
Is the US likely to Default? Conventional thinking also known as common sense would say no. For the US to default would mean a stalling of global finances and a well oiled system crashing to a halt. Many assets are priced using US treasuries as a base which would throw that system into disarray. US treasures are also used as collateral against loans around the word as they are seen as a no risk investment and a default would throw that system into chaos as world economics try and adjust. As the deadline approaches and no deal on the table, investors may start to get twitchy.
The GBP/ USD has been trading in a range, loosing ground against the GBP from recent gains. This coming week may see some direction breaking through 1.6470 with targets at 1.6668 and 1.7081 as key price levels where sellers are likely to enter the markets.
If investor's gains back confidence then 1.5999 is a likely area for buyers to come in at. 1.5593 and 1.5320 are strong key levels for short targets.