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Debt Ceiling Fight Is Center Stage, Not Data

By Kathy LienMarket OverviewSep 28, 2021 01:54AM ET
www.investing.com/analysis/debt-ceiling-fight-is-center-stage-not-data-200603262
Debt Ceiling Fight Is Center Stage, Not Data
By Kathy Lien   |  Sep 28, 2021 01:54AM ET
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Investors kicked off the week with renewed demand for US assets. The Dow Jones Industrial Average rallied for the fifth straight trading day while the US dollar strengthened versus the euro, Japanese yen and Swiss franc. Ten year Treasury yields also hit 1.5% intraday, which kept the dollar bid throughout the NY session. After last week’s busy economic calendar, data will take a backseat to central bank speak and the debt ceiling fight on Capitol Hill.
 

For now, market price action reflects little concern as investors grow numb to government shutdown threats. Votes on the infrastructure spending bill and a stop gap measure to prevent government funding from expiring on Sept. 30 could still derail the rally. We expect investors to take their cue from developments in Washington and comments from US policymakers this week. Fed Chairman Powell, ECB President Lagarde and Treasury Secretary Yellen are scheduled to speak along with a number of Fed Presidents.

 
Comments from central bankers are unlikely to alter the market’s expectations for US or Eurozone monetary policy. The Fed made it very clear that they are ready to begin tapering asset purchases and this outlook should sustain demand for US dollars. The European Central Bank reduced PEPP purchases but even with the decrease, they will lag behind the Fed. Monetary policy divergence and disappointment over the German election explains why euro underperformed the dollar today.
 
All other high beta currencies traded higher against the greenback with the Australian dollar and British pound leading the gains. The Australian government laid out a plan for COVID-19 “Freedom Day.” This third stage of reopening will begin as early as Oct. 11 for cities like Sydney when the vaccination hits 70%. Neighboring state Victoria has not yet provided a reopening date, but the move by New South Wales is a bright light shining at the end of the tunnel. If all goes as planned, Australia, which is poised to contract in Q3 looks forward to a strong robust fourth quarter recovery. Unfortunately the retail sales report reflects the economic pain of August lockdowns.
 
Sterling seemed unfazed by cautious comments from Bank of England Governor Bailey. He reiterated the central bank’s view that inflation is transitory and warned that the rate of recovery is slowing. The New Zealand and Canadian dollars extended their gains with loonie supported by oil prices, which hit a 3 year high. The Japanese yen and Swiss franc traded lower as risk appetite improved.
Debt Ceiling Fight Is Center Stage, Not Data
 

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Debt Ceiling Fight Is Center Stage, Not Data

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Comments (11)
MAMUI AKWASI
MAMUI AKWASI Sep 28, 2021 5:10PM ET
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please sell some now you are great
Gábor Kardos
Gábor Kardos Sep 28, 2021 5:07PM ET
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Kathy.. in 1H you were saying this is going to 1.25 and above due to money printing, etc. im getting confused
Meek Mr
Meek Mr Sep 28, 2021 6:50AM ET
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Pls are we to sell EUR and USD now...+
asad khan
asad khan Sep 28, 2021 4:19AM ET
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thank you for market stock not expirecn you have a great
Ioannis Lazaridis
Ioannis Lazaridis Sep 28, 2021 4:17AM ET
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Kathy , your macroeconomic skills are shining in this article. My respects for what I consider as one of the best article of the last three months. Thank you.
Yusuf Abubakar
Yusuf Abubakar Sep 28, 2021 4:17AM ET
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thanks
Frank Borroto
Frank Borroto Sep 28, 2021 3:32AM ET
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Thanks so mich for your knowledge and information :)
Yusuf Abubakar
Yusuf Abubakar Sep 28, 2021 3:32AM ET
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thank you
Worlaedem Ayer
Worlaedem Ayer Sep 28, 2021 2:38AM ET
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good
James Pattison
James Pattison Sep 28, 2021 2:18AM ET
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Time to juice the market some more… inflation worries to the wind… what stock is pelosi buying? Follow the democrat money… enrich themselves while they fleece or children and grandchildrens futures
irene brown
irene brown Sep 28, 2021 2:15AM ET
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good morning
Olanshile Ibrahim
Olanshile Ibrahim Sep 28, 2021 2:05AM ET
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good morning
Michael Feeney
Michael Feeney Sep 28, 2021 1:57AM ET
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Thanks Kathy and good morning to you
 
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