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Share prices have spiked up on Wall Street today after House Speaker John Boehner said that Republicans in the House of Representatives would offer legislation for a temporary increase in the debt ceiling in return for talks with President Obama regarding the budget.
This marks a departure from the Republicans’ previous standpoint which called for spending cuts to be incorporated into any legislation for raising the debt ceiling.
The markets have been on such a sustained slide that any good news out of Washington was always likely to result in a strong bounce from such an oversold state. The dollar has strengthened against the yen on the news, rising 0.81% to 98 yen to the dollar, but the reaction of EUR/USD and GBP/USD was more muted. Crude oil has rebounded from yesterday’s sell-off, jumping 1.75% on hopes that a resolution to the political stalemate would support demand.
Jobless claims data earlier showed a big increase last week. The number of claimants for first time unemployment insurance rose 66,000 to 374,000. A large portion of this can be attributed to the backlog in California dating back to its computer upgrade issue in September.
The fact that several weeks later we are still seeing repercussions from that glitch casts all of September’s data under a questionable light and it’s hard to see how the Fed will be able to make a case for tapering stimulus at their meeting later this month amidst such a paucity of economic data when the one federal report being issued throughout the shutdown is clouded by unusual issues.