Shutdown continues, the risk of a weaker dollar rises

On the eve of the US Senate considered two bills aimed at ending the so-called "Shutdown." One of them was proposed by the Republicans and the second by the Democrats. Both documents did not receive the required number of votes in the upper house of Congress.

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Recalling that the stumbling block among representatives of the Republican and Democratic parties was the financing of the construction of the wall on the border with Mexico.

The head of the White House, Donald Trump, refuses to approve the budget for the 2019 fiscal year, as long as it does not include an item of expenditure for these purposes.

Political differences persist for 5 weeks in a row. This is a record-long period and there are no obvious signs of compromise yet. Meanwhile, there is growing concern about economic growth. According to some estimates, the "shutdown" of the government will deduct 0.3% from the country's GDP in the first quarter.

In addition, the "Shutdown" may put pressure on the dollar and government bonds, if it lasts too long. However, a quick settlement of this issue can have the same effect, since discussions on the limit of public debt can be added to disputes over federal spending.

"All these increases the likelihood of lowering the US credit rating. So it was already in 2011. However, now the market reaction may be different. If last time the demand of investors for treasury bonds increased, now it may be the opposite. This will also have a negative impact on the dollar: the rate of the American currency will decline, "experts say.

The material has been provided by InstaForex Company - www.instaforex.com