Intraday Market Thoughts

After Congress Seals Deal, What’s Next?

by Adam Button
Oct 16, 2013 23:58

Congress is expected to vote on a deal to end the fiscal impasse late on Wednesday. Risk assets cheered the news all day with NZD leading and JPY slumping. The vote is expected to be straightforward but the market won't take anything from Washington for granted.

The three-week shutdown and debt ceiling ordeal is nearly over with almost nothing to show from it. There were no substantive changes to Obamacare and the can was kicked on funding the government until January 15. The new debt ceiling will hit Feb 7 but accounting measures can still be used to extend it.

The lone victory for Republicans is a pledge to negotiate for a budget agreement by mid-December but progress there is hardly written in stone.

With the crisis finally averted the market will look for a new theme. In the immediate term, corporate earnings are in focus. So far numbers have been mixed but the latest from IBM was disappointing and shares are trading at a two-year low.

The next focus will be the health of the US economy. It's rumored that non-farm payrolls will take 2-3 days to release but there has been no confirmation. Other key data points include retail sales and CPI. In order to get a full assessment of the impact of the shutdown we will have to wait until at least mid-November.

The outlook for the US economy is cloudy and despite the challenges in interpreting data, expect the market to be hyper-focused on the numbers.

The calendar for Asia-Pacific trading is light but the Senate will vote on the deal around 2200 GMT and the House a few hours later.

Both EURUSD, AUDUSD and USDJPY Premium trades (6) remain in progress.

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