The US dollar is presumed to continue its weakening trend alongside the Swiss franc today on views that negotiations to avoid the debilitating fiscal cliff of tax increases and spending cuts are not making headway with the deadline looming. Meanwhile, a slight decline in the today’s Flash Manufacturing PMI from the US is believed to suggest that cautious moods among US businesses and the slowing global economy are threatening to derail the US economic recovery.
With a year-end deadline coming fast, President Barack Obama and House of Representatives Speaker John Boehner held what was described a “frank” face-to-face meeting in an effort to break a gridlock in talks to restore the nation’s fiscal health. The two leaders talked as frustration mounted over the recent lack of progress that had become emphasized with a daily round of finger-pointing. Though there was no indication whether any progress had been attained, analysts say that the use of the word frank suggested both camps stuck hard to their opposing positions. Earlier in the day, President Obama suggested that the sluggish pace of deficit-cutting talks was a result of “contentious caucus” of GOP lawmakers who were making it difficult for Boehner to negotiate. In contrast, Boehner blamed the White House, saying it is unserious about cutting spending that it appears willing to walk the economy right up to the fiscal cliff.
Taxes remain the primary sticking point. Obama is insisting on higher tax rates for household incomes above $250,000 to cut federal deficits. For his part, Boehner says he opposes higher rates, though he has said he would be willing to raise tax revenue by closing loopholes and deductions instead. Meanwhile, Boehner complains that the president refuses to offer spending cuts to popular benefit programs like Medicare whose costs are rapidly rising. With both sides seemingly firm in their positions, demand for the Dollar is seen to dip opposite the Swiss franc.
On the economic front, despite buoyant readings in Retail Sales and Jobless Claims yesterday, such optimism is seen to be eased by today’s release of the Flash Manufacturing PMI. Manufacturing conditions in the US are estimated to have slowed this month, with the headline index seen to edge lower from 52.8 points to 52.6 points. Uncertainty over the fiscal cliff talks is forcing businesses to take a cautious outlook while the slowing global economy is debilitating foreign demand for US-made goods.
In contrast, breakthroughs in the Euro Zone’s fight to combat the debt crisis are deemed to support the Franc today. EU officials reached an accord on a single banking supervisor to oversee banks and granted approval to the disbursement of needed bailout funds for Greece. Considering these, a short position is advised for the USD/CHF today.
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