Monday morning in Washington is still largely undecided for the midnight deadline. The Democrats and Republicans have to reach an agreement or shut down the government. It is like a childish game of who can bully the other most because blame is being assigned to both parties by the opposite parties rather than those involved working like adults. For FX it has created even lower USD values. One Democrat is quoted as saying he hopes the Republicans will stop their threats of government shut down. On the other side are the Republicans hoping to stop spending and Obama Care.
FX Traders and Public Opinion
Frankly it is a confusing storm for anyone living in the USA or outside of it to watch such antics in a government that is supposed to lead the people and care about the people. Many do not want Obama Care to come into effect since it is essentially dictating that all people have to buy insurance whether they can truly afford it or not. The penalties that come with refusing are certainly one way the programme will gain funding. Republicans are trying to stop the bill for another year based on several very important reasons like the USA economy not being ready for such a programme let alone the people considering what is being required of them.
FX traders are faced with this same issue because it is affecting the markets. The difference is those who trade can almost guarantee the USD is going to lose value in just about any currency pair they trade. The JPY and CHF are bound to gain more profit as most run to these safe havens.
Public opinion has very little sway for these individuals on the hill trying to run down the clock, stop bills from being passed or even more from stopping anything that has already been set in motion. All the Democrats want is more debt by raising the debt-ceiling. It is a battle that is affecting many financial markets because the right or wrong decision could for the USA back into instability thus creating a weaker dollar on FX markets, when it needs to be much stronger for other currencies and countries to rally.
If FX sees a Government Shutdown
If the shutdown is forced to happen then there will be issues. About 17 years ago there was a major shutdown, which also did not help the FX markets. The USD lost quite a bit in value during that time. It gained some of it back, but that is what some are aiming for with such moves.
There is money to be made with the right plays. If the debt ceiling is lifted it means an infusion of cash for the USA, and this is needed to avoid putting the country in a very tough spot; however, until an announcement is made FX rates for the USD will continue to slide to a weaker position hurting how strong it can rally after all the political gunk is out of the way.