We use a range of cookies to give you the best possible browsing experience. By continuing to use this website, you agree to our use of cookies.
You can learn more about our cookie policy here, or by following the link at the bottom of any page on our site.

0

Notifications

Notifications below are based on filters which can be adjusted via Economic and Webinar Calendar pages.

Live Webinar

Live Webinar Events

0

Economic Calendar

Economic Calendar Events

0
Free Trading Guides
EUR/USD
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Oil - US Crude
Bullish
Wall Street
Bullish
Low
High
of clients are net long.
of clients are net short.
Long Short

Note: Low and High figures are for the trading day.

Data provided by
Gold
Bearish
GBP/USD
Bullish
USD/JPY
Bearish
More View more
Real Time News
  • The US Dollar index (DXY) may face range bound conditions over the coming days amid the failed attempt to test the June low (95.75). Get your #currencies update from @DavidJSong here: https://t.co/GsBcE6Z4G6 https://t.co/HIJ4vvcBIg
  • The Dow Jones could fall based on positioning signals, will the growth-linked Australian Dollar and Canadian Dollar follow? If so, what are the technical barriers ahead? Find out from @ddubrovskyFX here:https://t.co/yJrlR5C00P https://t.co/FzkIBlJLHG
  • Further gains in USD/IDR could be curbed as USD/PHP establishes a floor around 2017 lows. USD/MYR may fall next as USD/SGD fast approaches a key falling trend line.Get your #ASEAN currencies market update from @ddubrovskyFX here:https://t.co/9JgZm2n8Fl https://t.co/FeBuqJ64qB
  • Japanese Yen Outlook Bullish on Coronavirus Surge, US Earnings Season https://www.dailyfx.com/forex/fundamental/forecast/weekly/jpy/2020/07/11/Japanese-Yen-Outlook-Bullish-on-Coronavirus-Surge-US-Earnings-Season.html
  • The New Zealand Dollar is aiming higher, with NZD/USD eyeing fresh yearly highs while AUD/NZD may be carving out a bearish Head and Shoulders chart pattern. Get your $NZDUSD market update from @DanielGMoss here:https://t.co/osFxXvq5xF https://t.co/sKBkNvMvPz
  • Did you know a Doji candlestick signals market indecision and the potential for a change in direction. What are the top five types of Doji candlesticks? Find out: https://t.co/td5WA4hCZC https://t.co/3qXauAsm2Q
  • The Dow Jones and S&P 500 nervously face the earnings season as coronavirus deaths could reimpose lockdowns. The DAX 30 eyes an EU rescue package as the FTSE 100 awaits GDP data. Get your #equities update from @ddubrovskyFX here: https://t.co/A0k6JMMBOg https://t.co/iihbEYsfgi
  • It was a surprisingly quiet week in oil, with the net of this week’s price action showing a doji. But a longer-term formation has built that may open the door to that next trend. Get your #commodities update from @JStanleyFX here: https://t.co/zz6M2ce55V https://t.co/UxlbpgLBkq
  • Why financial market traders must monitor both monetary and fiscal policy? Find out from @MartinSEssex here:https://t.co/Fkzk88Y5gm https://t.co/beKjEODs2y
  • RT @RichDvorakFX: @Investingcom Seems to me like investors ‘high’ on central bank liquidity are fiending for more and staring down the edge…
Government Shutdown Could Trigger US Credit Rating Downgrade

Government Shutdown Could Trigger US Credit Rating Downgrade

2019-01-10 10:00:00
Peter Hanks, Analyst
Share:

US Credit Rating Talking Points:

  • Fitch rating agency issued a warning to the United States that a prolonged government shutdown could adversely impact its credit rating
  • The warning comes as the shutdown looks to enter its 20th day with no clear resolution in sight
  • Should Fitch issue the cut United States, it would be the second time a major rating agency downgraded the United States

A day after President Trump and Democrat leaders were deadlocked in an address to the nation, Fitch Ratings has issued a warning that would impact both parties. On Wednesday, the rating agency warned of a possible cut to the US ‘AAA’ sovereign credit rating later this year should the government shutdown continue. As the current shutdown threatens to become the longest ever, a credit cut could have a serious long-term impact.

Longest Government Shutdowns (Chart 1)

government shutdown lengths

Fitch’s global head of sovereign ratings, James McCormack said Wednesday “If this shutdown continues to March 1 and the debt ceiling becomes a problem several months later, we may need to start thinking about the policy framework, the inability to pass a budget ... and whether all of that is consistent with triple-A.” He continued, “from a rating point of view it is the debt ceiling that is problematic.” Such a downgrade would not be the first for the United States.

On August 5th, 2011 another major rating agency, Standard & Poor’s, downgraded the United States’ credit from its pristine standing. The cut from ‘AAA’ to ‘AA+’ was the first time the government was given a grade below perfect. Further, it occurred four days after the 112th United States Congress voted to raise the debt ceiling using the Budget Control Act of 2011. The downgrade came after warnings and a ‘negative outlook’ issuance from the agency in April 2011.

S&P 500 Price Chart Daily Timeframe, 2011 – 2012 (Chart 2)

2011 united states credit downgrade s&p 500 price chart

According to Standard & Poor’s, the downgrade was issued because a government budget deficit of more than 11% of GDP and net-government debt rising to 80% of GDP by 2013 was too high relative to other ‘AAA’ rated countries. Subsequently, the S&P 500 dipped roughly 5%.

Already on unstable ground, a rating cut could spell disaster for equity markets. While the immediate impact on the United States may be minimal, the longer-term implications would only build over time. Like with any borrower, a poor credit score constitutes higher borrowing costs. Given the $21 trillion in debt owed by the United States, higher borrowing costs would severely compound the cost of future payments and thus further erode confidence in the United States ability to repay debt.

--Written by Peter Hanks, Junior Analyst for DailyFX.com

Contact and follow Peter on Twitter @PeterHanksFX

Read more: Will the Stock Market Crash in 2019?

DailyFX forecasts on a variety of currencies such as the US Dollar or the Euro are available from the DailyFX Trading Guides page. If you’re looking to improve your trading approach, check out Traits of Successful Traders. And if you’re looking for an introductory primer to the Forex market, check out our New to FX Guide.

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.

DISCLOSURES

News & Analysis at your fingertips.