Research Team at Nomura suggests that the probability of a shutdown on 29 April has increased, but remains low, in their view.
Key Quotes
“Although the same political party controls the White House, Senate and House of Representatives, we once again approach a deadline to approve a budget to keep the government open. That deadline is 28 April. However, changes being pushed by the Trump administration for the remainder of FY17 (29 April - 30 September) raise the possibility that an agreement may not be reached by 28 April, resulting in a government shutdown.”
“The administration advocates increased funding for the border wall and $33bn in supplemental spending for the Department of Defense. In contrast, Office of Management and Budget (OMB) Director Mick Mulvaney is calling for a large swath of cuts totaling $18bn for the rest of the fiscal year. The proposed cuts are especially deep in foreign aid, research, and social programs. It must be emphasized that the cuts and increased defense spending are the president’s priorities, not necessarily Congress’s.”
“The primary challenge in passing the remaining FY17 budget lies mainly in the Senate, where 60 votes will be needed to pass the spending bills (the Republicans have a 52-48 majority). Senate Minority Leader Chuck Schumer has said that the Democrats would only approve a budget that does not include spending for the border wall and other provisions that Democrats would object to (such as defunding Planned Parenthood). Further, any increases in discretionary spending on defense would have to be accompanied by spending cuts elsewhere.”
“We believe the most likely outcome is that Congress will pass a continuing resolution (CR) for the rest of FY17 before 28 April. CRs have become the norm in federal budgeting.”
“In the current circumstance, there is a possibility that the Republicans will propose changes that the Democrats in the Senate will object to. However, the Republican leaders are likely to want to avoid a government shutdown as they have proven unpopular with the public.”
“The direct economic effects of a shutdown would be limited, in our view. For the most recent government shutdown (30 September through 17 October 2013) the Bureau of Economic Analysis estimated the direct impact on real GDP growth for Q4 2013 was 0.3 percentage points at an annual rate, mainly reflecting the furloughing of federal workers.1 In addition to the direct economic disruption, a shutdown would also affect the release of key economic data. For instance, on 1 May, personal income and spending data are set to be released, including PCE inflation. The FOMC meets later that week (2-3 May) and although the Fed would not be directly affected by a shutdown (it does not rely on appropriations from Congress), the FOMC would not have the most recent PCE inflation data at hand for its meeting.”
“That said, perhaps the largest effect would be the market’s reaction to the Republican’s inability to successfully govern, leading to further questions about their ability to deliver on their promises.”
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.
Recommended content
Editors’ Picks
EUR/USD trades weak below 1.0800 amid Good Friday lull, ahead of US PCE
EUR/USD remains depressed below 1.0800 after soft French inflation data, amid minimal volatility and thin liquidity on Good Friday. The pair keenly awaits the US PCE inflation data and Fed Chair Powell's speech for fresh hints on next week's price action.
GBP/USD holds steady above 1.2600 as markets stay calm on Good Friday
GBP/USD trades sideways above 1.2600 amid a typical Good Friday trading lull. A broadly firmer US Dollar could keep any upside attempts limited in the pair ahead of the US PCE inflation data and Fed Chair Powell's appearance.
Gold price sits at all-time highs above $2,230, US PCE eyed
Gold price hit all-time highs at $2,236 on Thursday to finish Q1 2024 with a bang. Most major world markets, including the US are closed due to Holy Friday, leaving volatility around Gold price highly subdued. US PCE inflation and Powell are awaited.
Jito price could hit $6 as JTO coils up inside this bullish pattern
Jito (JTO) price has been on an uptrend since forming a local bottom in early January. Since then, JTO has revisited the key swing point formed in early December, suggesting the bulls’ intention to move higher.
Key events in developed markets next week
Next week, the main focus will be inflation and the labour market in the Eurozone. We expect services inflation to be impacted by the easter effect, while the unemployment rate to be unchanged.