The current row about the US debt ceiling is slowly becoming an issue for FX analysts. It has always worked out in the end, nonetheless, from the point of view of Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, there are reasons why we should not ignore the debt-ceiling issue completely.
How to deal with the US debt ceiling event risk?
“In conversations, I am often told: it has always worked out in the past; the debate about the debt ceiling is part of the US political foofaraw, in the end an agreement is always reached. And indeed, I tend to agree with that point of view.”
“And please do not believe that the USD levels would correctly reflect this event risk! How risks are valued on the market depends on the risk profile of the ‘average market participant’. At first glance that is a rather hazy concept, but the formal definition is not trivial, and for our purposes a rough idea is quite sufficient.”
“It is not a case of creating a panic if I suggest keeping an eye on the event risk of fiscal chaos in the US and the possible USD negative effects if you are going to enter USD longs. Even if it is likely that it will all end well yet again.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.