The UK has woken to the news that the US Government has implemented a partial shutdown as Congress failed to come to an agreement over the debt ceiling following Budget negotiations. This is the first time this has happened since 1995 during the Clinton era and has piled the pressure on an already relatively weak US dollar. Cable is now trading at nine-month highs; levels which could be viewed as a limited window of opportunity for importers to take advantage if an agreement is eventually made on a new debt ceiling level over the next few days. Predictions have already emerged stating that a three-week shutdown could cause a 0.9 per cent reduction in economic growth this quarter, leaving serious question marks over the overall impact this political game could be having on the US’s economic recovery. In the UK, local investors will be anticipating manufacturing data for a clearer idea of the pace of the current economic recovery and may provide more room for the sterling to strengthen if the forecast rise from 57.2 to 57.3 does materialise.

GBP

The pound has moved to nine-month highs against the US currency and briefly touched levels against the euro not seen since the middle of January this year. The next few days include some important news release for the UK, starting with manufacturing PMI, which is expected to show a small increase from 57.2 to 57.3.

USD

Groundbreaking news emerged from the world’s largest economy after the US Government implemented a partial shutdown – a move last seen 17 years ago. The deadline for coming to agreement on a new level for the US debt ceiling was missed as Congress came to a stand-off over Obama’s healthcare plans. The US dollar has weakened drastically across the board on the back of the news and leaves it in a vulnerable position the longer it takes for a resolution to be made.

EUR

Concerns over the health of the Italian economy are proving damaging to the euro’s current position as political uncertainty continues to dominate movement across currency markets. The only silver lining for the single currency is the fact that Italian concerns are being overshadowed by a US Government shutdown. As a result, the euro managed to push to highs against its US rival last seen at the end of January this year.

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