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Lawmakers in Washington are still dragging their feet when it comes to sorting out a budget for the next fiscal year, while a partial shutdown of federal government operations draws ever closer.
A bill to extend government operations beyond 30 September is set to be voted on by the Senate today, but even if it is passed in the Senate, there are no guarantees it will succeed in the Republican-controlled House of Representatives.
If we can take any comfort from recent history, the pattern of negotiation when it came to avoiding the fiscal cliff was one where both sides pushed discussions to the last minute, and perhaps this is more of the same. That said, it seems a dangerous game of brinkmanship to play, gambling with the well-being of the economy in order to secure the goals of political parties.
The prospect of shutdown and the damage it might do the US economy is making US assets less attractive to investors, which has helped push the dollar lower and depressed share prices.
The euro has risen 0.26% against the dollar today and sterling has gained 0.6% against the American currency. By early afternoon in New York, the Dow was down 0.5% at 15,250 and the S&P 500 had fallen 0.33%.
The final reading for September of the University of Michigan’s consumer sentiment index showed a slight improvement over the mid-month reading, but has still slipped back from the kind of levels we were seeing throughout the summer, falling to 77.5, the lowest final reading in five months. This does not augur well for those expecting the economy to accelerate in the second half of the year.