US Fiscal Budget Deadlock Goes On, Debt Ceiling Looms, Euro Surges VS Greenback - 3.10.2013

The US dollar was smashed across the board losing the most against the Euro and the Japanese Yen as budget impasse extends to next week. Yesterday meeting between Barack Obama and congressional leaders didn’t changed anything with both sides repeating themselves. Republicans want to use 2014 budget and debt ceiling to increase pressure on Obama to delay it health-care program. Every week the U.S. government is shut down, 0.1% is trimmed from economic growth and failure to expand the $16.7B debt ceiling by Oct. 17 would have greater and global implications.

Moreover, yesterday the ADP Report said that in September employment excluding farming and public sector increased by 166K, less than projected rise of 177K adding pressure on the greenback. The US dollar index retreated below key support at 80.00 increasing technical downside bias and is likely to continue towards next support at 78.95.

The common currency versus the greenback bounced up to 1.3622 leaving behind its 1.3568/1.3464 range zone after political crisis in Italy resolved. Berlusconi changed his mind because he saw his fellow RPs abandoning him. Eventually the five-month coalition government gained confidence vote and remains in power. At the same time, ECB held key rate at record low at 0.50% and President Mario Draghi said that accommodative policy would remain in place for an extended period and inclined that ECB was ready to use LTRO. The EURUSD remains bullish and in an uptrend with fundamentals supporting it until now, thus in our view we could see even higher prices.

Elsewhere, the GBPUSD remained mostly unchanged fluctuating around 1.6218, with Halifax HPI, released as of typing, displaying that increased by 0.3% in September like in August but disappointing expectations of 0.6%. Lastly, the Crude Oil eased to 101.26 yesterday as Oil Inventories increased unexpectedly to 5.5M barrels for the previous week up compared to 2.6M barrels two weeks ago and higher than expectations of 2.4M.

On the data front, Euro-zone Services PMIs are eyed while later on today concerning Jobless Claims we are not sure will be released, as well as tomorrow’s NFP are uncertain due to U.S statistical services closure.