US Futures Suggest Government Shutdown No Big Deal
US equity markets are seen reversing Thursday’s losses at the open on Friday, even as investors prepare for the first government shutdown since 2013 if the Senate doesn’t pass a temporary spending bill.
Investors don’t appear particularly bothered about the prospect of a government shutdown, with the assumption being that one will eventually be signed and any economic impact will be minor or non-existent. While the US dollar has remained under significant pressure, there is little to suggest this is related to the budget talks while rising US yields is likely more a reflection of the general central bank tightening environment.
Equity investors seem unfazed, despite small losses being seen on Thursday. A temporary spending bill may have passed through the House but getting it through the Senate will be far more challenging making a shutdown likely. The question now is how long the shutdown will last as that will determine what, if anything, the economic impact could be. The last shutdown lasted a couple of weeks and the long-term impact was marginal which may explain the current relaxed attitude towards another.
GBPUSD Steady Despite Weaker UK Retail Sales
There isn’t too much else on the agenda as we head into the end of the week with a small amount of companies releasing earnings and UoM consumer sentiment the only notable data point. The consumer is an extremely important part of the US economy and the data is expected to break with a couple of months of softer numbers, with the survey seen rising back to 97 in January.
UK Retail Sales
The pressure on the US dollar has eased up a little as we approach the open but there is clearly substantial negative sentiment towards it, as clearly seen earlier in the European session when the UK released much weaker than expected retail sales data and yet cable rose shortly after. The dollar has since made a small recovery since and now trades down only a tenth of one percent on the day.
GBPUSD Daily Chart
Bitcoin Finds its Feet But More Downside Possible
Bitcoin appears to have found its feet following another sharp sell-off earlier in the week. Having dipped below $10,000 on Wednesday, prices have recovered a little although there still doesn’t appear to be much appetite at this stage, particularly compared to how aggressively dips were being bought towards the end of last year.
Bitcoin (CME) Daily Chart
Source – Thomson Reuters Eikon
It’s clear that we’re seeing speculators being shaken out here which means any sustainable move higher this time around may be more gradual. While some are questioning whether this is the beginning of the end, I think it’s more a case of the cryptocurrency – and others – heading back to where they should have been trading at this moment, rather than the frenzy-driven levels that they actually achieved. I think there could still be some more downside for bitcoin unless it quickly arrests the slump.
For a look at all of today’s economic events, check out our economic calendar.
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