Dollar continues to rise as the issue over the US debt ceiling explicitly impacts markets. President Joe Biden, House Speaker Kevin McCarthy, and other congressional leaders are meeting again on Tuesday to discuss a resolution that will keep the US from facing a default.
Biden and McCarthy have been searching for common ground for several months to increase the government borrowing limit to $31.4 trillion as a default could trigger a sell-off in stock markets, which would deal a blow to the world economy. It could even outdo the 2008 financial crisis.
Biden remained silent on the terms of the negotiations, only stating that a compromise could be found soon. "I remain optimistic. But I genuinely think that there's a desire on their part, as well as ours, to reach an agreement, and I'm confident we can do that," he told reporters on Sunday.
Previous meetings did not really achieve anything because even though Republican aides and White House staff planned to begin budget discussions, this did not happen. However, Secretary Janet Yellen recently warned that the US risks a catastrophic default as soon as June 1 if the debt limit is not raised. She did not specify what exactly the Treasury Department will do if Congress fails to raise or suspend the debt ceiling in time. "We have no satisfactory solution to the debt limit problem other than Congress taking action to increase the debt ceiling," she said.
McCarthy state that any change to the limit depends on a budget deal, but Biden has criticized Republicans for risking default for leverage in negotiations. For Biden, the risks of a historic default coincide with his re-election hopes, as his struggle with high inflation, which led to a banking crisis and potential economic recession, is unlikely to be a positive point in his career as US President.
In terms of the forex market, euro is bearish, but seeing growth is not impossible. For this, the quote has to reach 1.0880, or at least stay above 1.0850. This will allow a rise beyond 1.0910, heading towards 1.0940. In case of a decline around 1.0850, euro will fall to 1.0800 and 1.0770.
In GBP/USD, bulls are trying to recover losses, but to see growth, the quote has to consolidate above 1.2475. Only that will trigger a much larger rise to 1.2500 and 1.2540. In case there is a decline, bears will attempt to take 1.2450, which could lead to a fall to 1.2390 and 1.2350.
