The market’s most traded currency pair fell below earlier levels on Tuesday. The current EURUSD quote is 1.0710.
The flow of information was scarce the day before, as markets in the US and parts of Europe and the UK were closed due to a public holiday.
Investors are returning to activity today. They will remain focused on the agreement between the Republicans and Democrats on the public debt. As a reminder, the framework agreement implies raising the public debt ceiling by 4 trillion USD over two years, while the federal government will refrain from increasing spending, except for the US defense sector.
The market believes that, while the agreement in its current form will significantly limit government spending, it is unlikely to reduce the overall budget deficit. In fact, it will not lead to any sharp changes in US finances.
The House of Representatives will vote on the agreement on Wednesday.
It will be some time before the Congressional Budget Office analyses its accounts in detail to form a politically neutral assessment of the impact of the decisions taken.
The US Consumer Confidence Index for May, published by the Conference Board today, is worth a look. Separate signals indicate a sharp decline in consumer spending, which is a bad sign.