US debt ceiling standoff leading USD higher?
As we approach the second half of the month, trading sentiment for global markets from a theme perspective appears to be in line to be dominated by US Debt Ceiling negotiations. Although some optimistic headlines have come through following talks last week, there is no tangible breakthrough to the political gridlock and the clock is ticking.
As we begin to prepare for a scenario where debt ceiling negotiations go down to the wire, it is very much probable that improved demand for the Greenback as an asset of safety will persist. Equity markets and world stocks are vulnerable to further adjustments lower. The outlook for Gold will remain further supported should the prolonged debt ceiling negotiations lead to an image that the United States will drive its car on empty fuel for as long as it can once the June 1 deadline approaches.
Aside from the US Dollar, the asset that would hypothetically benefit the most from US Debt Ceiling negotiations going to an uncomfortable place for investors would be Gold. From a technical perspective we need to monitor that price action will not fall through the net at $2,000 as this will invite sellers into the picture in a hurry. As it stands and even with the USD in demand, Gold has commenced the new trading week once again above the $2,000 handle.
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