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Dollar Remains Uncertain After U.S. Debt Vote

January 24, 2013 in Forex Fundamentals and News

U.S. found temporary relief with the U.S. house vote for rising the borrowing limits today. The vote went into favor of increasing the government borrowing limits from the current 16.4 trillion U.S. dollars. The catch is that it is a temporary extension with a limit of May 19th. The voting result was 285 for versus 144 against.

The proposal will now be sent to the U.S. senate and it is expected that it will be passed as it is.

US national debt is estimated to have reached a level of 16.47 trillion against the government’s borrowing limit of 16.39 trillion. The national debt had become more that the U.S. gross domestic product in 2012. With the current situation is was estimated that without increasing the borrowing limits  the U.S. treasury would run out of funds to fulfill its obligation of payments by February 15 to March 1st week.

U.S. Dollar remains uncertain

EUR/USD remains under pressureThe dollar has been moving without any clear direction against most of the currency majors except Japanese yen.


After the markets opened on Monday, EUR/USD moved in tight ranges between 1.3300 to 1.3332 for over 30 hours of trading. A break of that range resulted in quite volatile moves which have been failing to show any clarity of direction. Since then the currency pair had gone to a high of 1.3371 before a fall to 1.3266. The subsequent rise saw it touching 1.3354 before another fall to 1.3264.

GBP/USDGBP/USD running in tight ranges

Since Monday market opening GBP/USD continues to move sideways in the range between 1.5802 and 1.5893.

USD/JPY uncertain about the initial fallUSD/JPY

Unlike other U.S. dollar pairs USD/JPY has seen some directional moves. After opening at 90.08 the pair had tried to move up initially but failed at 90.24. A strong fall from there took it to the low of 88.06. Some recovery has been seen after that but the pair is facing resistance below 88.80 and seems to be losing the steam again.USD/CHF running sideways


After a drop from 0.9354 to 0.9275 this week, the pair has gone into a sideways mode. The price action has been between a narrow range of 0.9275 and 0.9315 for past over 36 hours and is clearly not showing any trend.

Commodity Currencies Losing Direction Amidst Uncertain Economic Outlook And Psychological Pressure

January 23, 2013 in Forex Fundamentals and News

AUDJPY - direction less movesCommodity currencies has been seeing a directionless volatile moves against the U.S. dollar. AUD/USD has tried twice to touch the psychological 1.0600 level since yesterday but failed miserably. First time it had gone as high as 1.0578 and then after a drop to 1.0549 it again recovered but failed strongly at 1.0574 and fell sharply to 1.0527 before entering a sideways mode. USD/CAD has made 3 attempts since Friday to test 0.9950 level but failed each time. The first attempt took it to 0.9932 followed by 0.9946 and the last one failed at 0.9945. After recovering from 0.9815, the pair is moving into a narrow range between 0.9900 and 0.9950.

Mixed economic data

Today’s consumer price index data for quarter 4 of 2012 from Australia came out weaker than the market expectations. The quarter on quarter change in the CPI in Q4 was 0.2% against the consensus of economist for a change of 0.4% and the previous change of 1.4%. The year on year change of 2.2% was better than that of quarter 3’s 2% but was less than the expected 2.4%.

Today’s China Conference Board’s leading index data which aggregates six economic indicators to measure economic activity in China indicated a slowdown from previous 1.1 to 0.4 in December. China being the largest export market for Australia affects the sentiments for Australian dollar strongly.

On the other hand yesterday’s data showed an unexpected drop in the existing home sales in the U.S. also. The month on month change in the existing home sales in December 2012 dropped to -0.1% from the previous  4.8% while the market consensus was for a drop to 1.2%.

Global economic outlook concerns

U.S. debt crisis

US debt to GDP ratio

Though Republicans have shown some flexibility for their demand to have the budget spending cuts to increase government’s borrowing levels but this only gives a temporary relief.  On Wednesday in the U.S. the house vote is scheduled for Republican party sponsored legislation to allow Obama administration to extend the borrowing limits to cover the cost obligations for next 3 months. The estimates are that the U.S. Treasury will not have sufficient funds to pay all its bills sometime between Feb. 15 and March 1 week. Delays in firm steps to tackle the issue with longer-term goals is a threat not only to the U.S. economy but the global economy.

Mixed sentiments in Euro zone

Even though the progress in decisive steps in policy decision and Greece bailout have brought in some optimism but one the other hand the crisis is far from over. The high unemployment levels in Europe and ECB’s expectation that the euro-zone economy will shrink 0.3% in 2013 do not create any overall optimistic picture about the economy. The efficient channeling of rescue funds in the time to come and mutual agreements about the same remains a challenge.” Making the ECB a single European bank supervisor this year is a major organizational challenge”,  European Central Bank President Mario Draghi said late yesterday in Frankfurt.

Commodity currencies

Any uncertainties about global outlook keep the uncertainties on for the global currencies. Some positive recent outlook about China’s economic growth in 2013 have been favoring the strength of Australian dollar but on the other hand the overall global economic uncertainties are keeping the Aussie in check. Same is the case with Canadian dollar which has weaken against the US. dollar recently but is now hesitating ahead of the psychological level of 1.000 or parity.