“The US Dollar Falls After Shocking Announcement on Debt Ceiling Crisis”

Investing.com – The US index started trading higher before turning lower. The greenback initially traded close to a two-month high, as traders digested the prospect of a Fed rate hike as well as the US debt ceiling deal passing through congressional division.

However, news of the complexity of the US debt ceiling crisis dropped the index by 0.31% to 103.815 against a basket of foreign currencies, while gold futures rose to $1961.04, up by 0.78%.

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The debt ceiling crisis is not over yet

US President Joe Biden and Republican Congressman Kevin McCarthy reached an agreement over the weekend to suspend the debt ceiling until 2025 and set some federal spending in order to prevent a default on US debt.

The deal has only a limited amount of time left to work its way through a deeply divided Congress before the US Treasury runs short of funds to cover all of its liabilities, and it is sure to face opposition from the extremes of both parties.

Meanwhile, the dollar held steady on Monday, when both the US and UK markets were closed, and is on track to post a monthly gain of just under 2.5% as traders weigh in on the possibility that US interest rates will remain elevated for longer.

However, the latest news reported that the US Republican Party spokesman announced that his party rejects the recent debt ceiling agreement.

Important data

The widely watched announcement was scheduled for Friday and is expected to show that the country’s labor market remains resilient, with 180,000 jobs expected to be created in May.

Moreover, inflation remains elevated, resulting in a 60% chance of a 25bps hike from the Fed in June, to support the dollar.

Dollar and other currencies

Elsewhere, it fell 0.3% to 1.0691, with the euro feeling the impact of the dollar’s rally, while it surprised lower, rising 3.2% on the year in May, below the expected 4.4%.

It also rose to 1.2345, while trading down 0.1% to 140.41, after the pair earlier touched a six-month high with higher yields.

It rose slightly to 0.6523, while rising 0.4% to 7.0918, hitting a new six-month high after the People’s Bank of China cut its midday rate, providing pessimistic signals to the market.

Also, the rate rose 1.4% to 20.2807, with the lira remaining very weak after Tayyip Erdogan’s re-election as Turkey’s president, suggesting that interest rates will remain low despite rising inflation.

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