We won’t see a big USD relief rally
There’s now more optimism according on the US as a plan to solve the problem is discussed in Senate. This supports USD versus JPY and CHF and weakens it versus higher-yielding currencies like AUD and NZD.
Societe Generale: “People have been building dollar long positions, giving consideration to the risk of not having dollars when a deal will eventually be signed.”
However, the uncertainty remains as any deal would have to win approval in the House of Representatives, where there will likely be stiffer resistance from conservative Republicans who demand more spending cuts.
Praevidentia Strategy: “This is unlikely to lead to a sustainable rally in the dollar and shares. US policy makers are just kicking the can and we will have another showdown in January. Under such circumstances, it would be difficult for the Fed to reduce its stimulus.”