This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.
Senate Majority Leader Harry Reid and Republican Leader Mitch McConnell announced the bi-partisan agreement on the Senate floor around 5pm BST.
Senator Ted Cruz, seen as the biggest obstacle to the deal in the Senate, said he would not seek to delay a vote.
Assuming the bill is passed by the Senate, it would then still need to be passed by the House of Representatives before it could be signed into law by President Obama.
Reports suggest that House Speaker John Boehner, who has been under pressure from staunch House Republicans to avoid a vote relying on Democrat votes, would allow the House to vote on the Senate plan, where it is believed there will be enough votes in favour of the deal.
This is the first concrete development we have seen in the bitter wrangling over the US fiscal issues and as word spread earlier, it sparked a major rebound on Wall Street. By early afternoon in New York, the Dow was up 1.16% or 176 points at 15344, while the S&P 500 gained a similar percentage to 1717.1. The dollar also strengthened on the news, with USD/JPY climbing 0.64% and Cable falling 0.4%.
The deal has no doubt come as a relief to concerned investors, avoiding as it does a potential debt crisis as well as re-opening the government, but it’s worth noting that this is only a stop-gap solution. We could well be reliving Groundhog Day in the New Year, when the same issues will re-surface.