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Next Round of Talks on Watch

US debt ceiling negotiations continue today and the focus is on the US Dollar given the two-way risks around the issue. Given the lack of progress so far, there are limited expectations that any resolution will be agreed today. As such, USD might trade higher into the middle of the week given increased safe-haven demand.
 

Biden Optimistic – McCarthy Less So

Over the weekend, President Biden expressed optimism that a deal could be done to avoid a historic debt default. However, the Speaker of the House struck a different tone noting that the two sides were still very far apart and that in order to get a deal passed through both houses in time an agreement would need to be in place by the end of this week. Given that Biden leaves tomorrow for the G7 meetings in Japan, today represents the last real (scheduled) chance to achieve a deal.
 

Market Impact

As such, if today’s talks pass without resolution markets will likely move to price in a higher likelihood of a US debt default which should see risk assets pressured lower while USD and other safe-havens rally. On the other hand, given the limited expectations, should any positive news emanate from today’s talks, particularly if a resolution is unexpectedly agreed upon, this will likely see stocks rallying sharply while USD peels off.
 

Technical Views

Nasdaq

(Click on image to enlarge)

The rally in the Nasdaq has seen the index breaking out above the 13237.4 level, supported by bullish momentum studies readings. While above this level the focus is on a continuation higher with 13752.6 the next objective for bulls. 

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