Progress in debt talks, but time is running out

With just two days left to when the Treasury says it will have to rely on cash to pay the US government’s bills, leaders in Congress are in a race against time to raise the debt ceiling.

There were very positive signs yesterday from the Senate, with Majority Leader Harry Reid and Minority Leader Mitch McConnell appearing to be on track to a bi-partisan deal.

Mr Reid said, ‘We’ve made tremendous progress’, but news emerged earlier today that House Republicans were attempting to put together a rival deal.

House Speaker John Boehner subsequently told a press conference that no deal had been agreed, though. ‘We're going to continue to work with our members on both sides of the aisle, to try to make sure that there's no issue of default and to get our government reopened.’ he said.

Harry Reid warned that a Republican-led bill from the House would not get past the Senate and described a rival deal as an attempt to torpedo the Senate’s bi-partisan progress. He also said the deadline ‘is looming’ and that credit rating agencies were talking about downgrading the US ‘as early as tonight.’

Even though Congress remains frustratingly bound by party politics, with House Speaker Boehner apparently bending to the will of the Tea Party faction, the dollar has gained against the euro on hopes spurred by the Senate negotiations. EUR/USD dropped 0.5% by mid-afternoon in New York.

After four rises in four days, the US stock market has retreated though, with the Dow slipping 0.38% to 15,243 and the S&P 500 falling 0.31%.

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