Republican leader John Boehner wanted to pass a “Plan B” decision that would prevent tax hikes for Americans earning up to one million dollars a year. The idea was to embarrass the White House, that would have vetoed a decision to help the middle class.
However, Boehner failed to capitalize on the majority that Republicans have in the House: he was unable to gather the votes needed to pass the motion, and eventually withdrew it. Tea Party factors rejected any kind of tax hike, even for those earning more than one million a year.
Worse off, Congress now went on vacation and will return only on December 27th, very close to the cliff deadline.
Negotiations seemed to advance earlier in the week, but the “Plan B” talks were certainly a regression. Nevertheless, politicians are likely to do what politicians do: make a decision at the last moment. So, all the recent commotion and “blame game” could be just the last round before a deal is cut and every side declares victory.
However, these recent events have dampened the mood in the markets, pushing the dollar and the yen higher. EUR/USD dopped to 1.3180 before bouncing a bit. USD/JPY slid as well.
Further reading: 5 Advantages of a Strong CurrencyGet the 5 most predictable currency pairs