The IMF- International Monetary Fund warned yesterday that the United States have to quickly reach an agreement on a permanent fix to avoid automatic tax hikes and spending cuts early next year, saying delay in a solution could be harmful to the global economy.
The IMF has estimated that the tax increases and spending cuts amount to be $600 billion in 2013. If are to be triggered, this could contract U.S. gross domestic product by around 4.5%.
Today morning, Asian stock markets declined after the release of mixed economic data from China and as concerns over the U.S. fiscal policy continued to dampen market sentiment. The Asian markets are also paying attention to China Communist party gathering today.
The Communist Party is in the process of holding its 18th Party Congress and this high profile event will continue into next week culminating with the introduction of the country's newest leaders. The markets are watching it closely as the decision that will be taken will not only affect the region.
In Europe, Greek Prime Minister had achieved the required votes in Parliament to enact the latest rounds of austerity measures in order to receive the latest aid. The market’s reaction was somewhat tempered as the IMF and Troika are expected to delay their decision on the much needed aid.
GBP/USD surprise caught the market yesterday as the Bank of England as expected decided to leave its rate as is but it also announced that he is going to halt the expansion of its bond-buying program. Most economists didn’t predict that Governor King and his colleagues would vote to halt the bond buying program. This decision indicates that we may have reached the end of what quantitative easing can do to boost the economy.
Resistance: 1.6011, 1.6045, 1.6134
Support: 1.5963, 1.5928