Could the fiscal cliff and China’s new leaders dent the dollar?
Wednesday, November 7th, 2012
One cause of uncertainty hanging over the Forex markets has finally been resolved in the last few hours. The US electorate have now decided who will be in charge of the world’s largest economy for the next four years.
The dollar was gaining ground against the Euro and Sterling in the run up to polling, but saw a small retrace this morning on market expectations of further rounds of quantitative easing.
US businesses and investors are turning their attention more towards the looming ‘fiscal cliff’ and its potential impact on federal deficits and debt. The major credit ratings agencies are maintaining a negative outlook on US debt due to this, with the dollar’s ‘reserve currency’ status being one of the few planks still supporting its elevated rating. If no settlement is forthcoming, the US economy could be shocked into further recession, putting more pressure on the dollar.
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