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What Will the Government Shutdown Mean?

Posted by WorldWideMarkets . on Oct 2, 2013 3:19:00 AM

What will the government shutdown mean for the dollar? Estimates of the cuts to gross domestic product range from 0.1 percent per week to as much as 0.1 percent per day, or about $15 billion a day in lost productivity if the latter. Anything close to either extreme is negative for the dollar.
As the Fed looks at the data it will delay tapering which will also be negative for the dollar.

There is also concern that the ratings agencies may cut the U.S. rating but they are on the record as being concerned about the long-term debt and the debt ceiling debate is likely to have a bigger impact to their thinking. Of course, while the government can’t agree on spending, it delays any action on raising the debt ceiling.

But the upside is that if risk aversion rises, the U.S. dollar may get a bid on safe haven flows.

So possible bid on the dollar in the near term but after it’s over and we count the cost, the dollar will take a hit. The overall trading trend for the fourth quarter of dollar weakness is largely intact.shut down trading


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