FX Alpha 08 October 2013

And what if the unthinkable does happen?

And what if the unthinkable does happen? With the budget deadlock remaining and the deadline for raising the debt ceiling fast approaching the FX market shows no signs of USD weakness or even panic. Would a US default be even manageable? Or could the Fed solve the problem with even more bond purchases? While a rise in yields might be avoided a USD weakness could not. The only reasonable explanation for the current calmness of the FX market is the expectation that the problems will be solved last minute.

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