Daily Forex Brief 30th jun

Daily Forex Brief London: Thursday 30th June 2011

Disturbing developments in US debt limit discussions Now that Greece has been temporarily 'saved', the focus might start to shift to the unresolved and equally serious issue of the US debt limit. Unfortunately, the omens on this front still look gloomy, with President Obama yesterday chastising the Republicans for their lack of concern for children and the elderly in their negotiations over the deficit. The Democrats want tax increases to form part of the package to reduce America's fiscal largesse, whereas the GOP is after meaningful cuts in entitlements and in Medicare payments to the elderly. The Republicans continue to argue that a bill which both lifts the debt ceiling and raises taxes will not pass through Congress. Most alarming is the position of a number of new Congressmen aligned to the Tea Party movement who have dismissed the urgency of raising the debt ceiling by August 2nd. Two days ago, a senior Republican who participated in the bipartisan deficit negotiations with Vice-President Biden stated that it was increasingly likely that Republicans in the House will not act to raise the debt limit by the August 2nd deadline unless the Democrats agree to major changes in entitlements. The more alarming language being used by Republicans this week has certainly unnerved both the dollar and treasury yields - for instance, the 10-yr yield has jumped 25bp from the lows recorded late last week.

Also in today's Daily Forex Brief: After the ecstasy, the cold light of day Risk appetite improves further on Greek 'Yes' vote The UK's worsening inflation problem