EUR/USD still on positive territory, US government shutdown weighs

The euro preserved gains against the US dollar on trading Monday, as market sentiment was still dominated by the partial government shutdown in the United States.

EUR/USD touched a session high at 1.3590 at 8:30 GMT, after which consolidation followed at 1.3568, gaining 0.11% for the day. Support was likely to be found at October 3rd low, 1.3503, while resistance was to be encountered at October 4th high, 1.3631.

On Sunday Republican House Speaker John Boehner said that the House will not support bills in favor of a complete re-activation of the government or raise the US debt limit unless agreement on spending cuts with the Democrats was reached.

“On the 17th, we run out of our ability to borrow, and Congress is playing with fire,” Treasury Secretary Jacob Lew said on CNN’s “State of the Union” on Monday. “If they don’t extend the debt limit, we have a very, very short window of time before those scenarios start to be played out. If the United States government, for the first time in its history, chooses not to pay its bills on time, we will be in default”. However, Jacob Lew did not define a specific date, when the nation might plunge into default, but according to estimations by the US Treasury, the debt ceiling was expected to be reached no later than October 17th. On the other hand, the United States will have cash at the amount of 30 billion USD and it will be insufficient to meet expenditures that can reach as high as 60 billion USD in subsequent days.

In addition, today the German central bank, Bundesbank, called on US lawmakers to find a solution to the budget crisis as soon as possible, as the risk of default was rising and the potential consequences for the global economy could be unpredictable. This statement came ahead of the annual meeting of the International Monetary Fund (IMF) and the World Bank in Washington, scheduled later in the week.

Meanwhile, in the Euro zone, according to a survey by the SENTIX research group, encompassing 2400 respondents, including 510 institutional investors, regions investor confidence decreased unexpectedly in October, dampening the optimistic outlook over economy. The index, gauging confidence, dropped to a reading of 6.1 in October from 6.5 a month ago, while experts had projected that the index will show an advance to 10.6.

A separate report showed that the final value of Euro blocs Gross Domestic Product rose 0.3% during the second quarter of the year compared to the first quarter, meeting expectations and the initially estimated value. During Q2 2013 compared to Q2 2012, however, the GDP figure dropped 0.6%.

Elsewhere, the euro was losing ground against the sterling, as EUR/GBP cross fell 0.30% on a daily basis to trade at 0.8437 at 13:28 GMT. EUR/JPY pair was losing even more, 0.49%, to trade at 131.45 at 13:31 GMT.