. US Dollar Falls as Debt Ceiling Impasse Stalls Negotiations

US Dollar Falls as Debt Ceiling Impasse Stalls Negotiations

US Dollar Falls as Debt Ceiling Impasse Stalls Negotiations

22 May 2023

Due to the impasse in the debt ceiling negotiations, the US dollar falls on Monday at the opening of the US session.

  • With the US trading session just around the horizon, the US dollar is now trading lower, and losses are accelerating during the European session. 
  • With the remaining G7 currencies weakening and Asian currencies strengthening against the US dollar, the US Dollar Index is trapped between these two forces.
  • As traders evaluate the situation, US stock futures point to a mixed opening and an elevated VIX on Monday.

After trading mostly sideways on Monday with the US Dollar Index (DXY) staying flat for most of the day, the US Dollar (USD) is now turning bearish following the US trading session. At the start of the US trading session, the US Dollar began to give up gains it had made against the majority of the G7 currencies, including the Euro and the Swedish Krona, while other Asian pairs, like the South Korean Won (KRW) and the Japanese Yen (JPY), were trading at session lows versus the Greenback. With his remarks that the Fed cannot shield the US economy from a debt default, Fed’s Kashkari alarmed traders.

On the macroeconomic data front, traders will be considering the little progress in the US debt ceiling negotiations, while some unexpectedly good news comes from the banking industry, as PACWEST sold a significant portion of its portfolio of real estate loans to reduce its risk.

This week, the US will issue a series of significant macroeconomic data points that might have a significant impact on the US Dollar, with PMI data on Tuesday and Durable Goods and the PCE Price Index, the Fed’s favoured inflation indicator, on Friday leading the way. As colleague Kashkari has already stated his point of view in early comments this Monday, other Fed officials will also be speaking on stage this Monday. Bullard, Daly, Bostic, and Barkin are all scheduled to appear at some time in several events or discussions.