Investors appeared anxious this morning following the high-tension debt talks between Senate and House leaders that resulted in walk-outs and partisan pot-shots on both sides. Republican presidential runners have hit the talk-show circuit blasting President Obama on failed leadership while Democratic congressmen slip similarly rancid attacks on the Republican leadership into newspapers and other various public mediums.
The unease seen on Wall Street these past few days has given many investors a feeling of intense risk aversion heading into the final week of debt talks before the August 2 deadline is passed. US stocks appear ready to take a dive if talks fail. The resulting slips in market confidence will likely ripple throughout the global financial system as well.
Analysts are already pointing to record gains seen in the value of the safe-haven Swiss franc (CHF) and Japanese yen (JPY) this week; both capturing headlines with their bullish runs. The US dollar (USD) finds itself in a pickle among this market maelstrom. Traditionally, the USD acts as a safe-haven during times of risk aversion — even when that risk is emanating from the United States. But there is a sense that investors are hesitant to move towards the greenback even though such moves can be felt in today’s trading.
Which direction the USD moves over the next two weeks will be of major interest to anyone involved in foreign exchange (forex) trading. If the US defaults on its debts for the first time, history will have been made and traders will be sitting on the front row of severe shifts in global capital and financial markets. You may one day be asked, “Where were you when the US defaulted?”
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