FX Week 27 October 2013

Taking stock of the USD


It is three weeks since our last FX Week publication in which we noted that the USD was holding up surprisingly well considering the uncertain economic and fiscal circumstances in the US. While some of those macro and policy related uncertainties that prevailed in early October appear to have lifted, the USD has still succumbed to accumulating pressures, with its recent losses catching up to some extent with gloomy concerns and realities. Despite the agreement in Washington DC to lift the debt ceiling until February 7th and to fund the government until January 15 next year this offers only a temporary solution and it also raises the possibility of another fiscal standoff in early 2014. In this light US monetary policy is also likely to remain paralyzed for the foreseeable future, with no chance of any reduction in QE at the upcoming FOMC meeting this week.

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