According to Greg Gibbs, analyst at Amplifying Global FX Capital, markets must now factor in the risk of a period of US government shut-down that could undermine consumer and investor confidence.
“The current date up to which funding is approved is 21 December. It might also raise the risk, albeit modest, that a prolonged stalemate could delay interest payments on US government securities. It might point to ongoing risks to stalemate in Congress on a range of legislation.”
“Political risk in the USA appeared to diminish in 2018 as Congress agreed on tax cuts, increased spending, and pushed out the perennial concerns over the debt ceiling. However, the debt ceiling suspension ends on 1 March 2019, the Congress is now split, and evidence suggests that stubbornness in the White House and the House of Representatives raises the risk of deadlock over funding bills and policy over the coming year.”
“This may add to economic uncertainty and asset market volatility in the US, a factor that may undermine the USD.”
“Rising political risk in the US, coming around the time that the Fed meets to decide on its rates policy on 19 December, could undermine the USD and US asset markets. It is another factor that adds to the uncertainty in the FX market. The EUR may be pressing supports today on political uncertainty in Europe, but it could quite conceivably be busting resistance in the days or weeks ahead as focus shifts to US rates and politics.”