Part 2 of Weekly Market Movers Prior & Coming Week: A weekly market strategy overview for traders and investors in stocks, forex, commodities, both spot market and binary options
See Part 1 for prior week market movers and their lessons for the coming week. As for the coming week, here are the likely key market drivers and ramifications.US Debt Ceiling Drama
With time running to both reach an agreement and draft the actual legislation needed before the August 2nd default deadline, progress or lack thereof is a potential major market driver. Unlike in prior weeks, news on the US debt ceiling fight and default threat should have everyone’s attention until some agreement is reached.
After last week’s talks broke down, US congressional leaders got a scolding from President Obama Saturday morning and have been working steadily since then. They hoped to be able to show enough progress by Sunday afternoon EST to avoid spooking Asian markets, which open Sunday evening EST.
The goal is to show real resolve and progress towards reducing the US deficit. If they can only manage a short term extension of the default deadline without that progress, then credit agencies could strip the US of its AAA ratings, which could scare markets and raise borrowing costs for both the US public and private sector.
As with the EU debt crisis, political considerations grossly complicate making a deal. Both sides seek concessions that would hit the other’s appeal with their core voters in the coming year’s elections. Democrats want the Republicans to concede new taxes; Republicans want the more leftist Democrats to cut social program spending in exchange for any debt ceiling increase.
While markets continue to believe the US is unlikely to default, what’s at stake now is retaining global market confidence that Washington can get serious about cutting its deficit. Failure to succeed on that front will hit both the USD and global risk appetite. Success would achieve the opposite. The USD could get an even stronger boost if markets realize just how problematic the latest EU Greek rescue really is.Reaction To Latest EU Second Annual Greece Rescue Plan
As we noted here on Thursday when news first came out about the EU’s latest bailout, 3 problems were immediately apparent.
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