The US political manoeuvres are adding to uncertainty around the USA, which is causing a flight to safety out of the US dollar into the likes of precious metals and commodity pairs.
The US fiscal year ends today.
The newswires have been flooded this US trading session with numerous briefings from the US Senate and some big economic data points. Senator Manchin said the top line for the agreement to begin budget resolutions would be $1.5 trillion. This would follow the debate on reconciliation starting on 1st October 2021, which would come to market when all funds from COVID-19 and ARP have been spent and after the Federal Reserve ends quantitative easing. It doesn't sound like any of that is going to happen anytime soon. There is no way for US house speaker Nancy Pelosi to pass the infrastructure bill seeing as the Democrats still need to pass the reconciliation bill first.
Ten-year US Treasury yields are still trading near yesterday's highs, while the US dollar index is flat for the day. While the dollar and rate benchmarks remained flat, precious metals recovered from earlier losses. Gold jumped over 2% to reach its highest level in a week.
The US debt ceiling talks continued to focus investors' attention and the yellow metal was seen as a safe-haven asset after Treasury Secretary Janet Yellen warned that failure to raise the ceiling would cause a financial crisis.
According to the Bureau of Economic Analysis' third estimate released today, the United States economy expanded at an annualized rate of 6.7% in the second quarter. It was a little higher than analysts' expectations and 0.1% higher than the second estimate provided by the BEA.
Today, the dual mandate of the Fed was put to the test as price stability and maximum employment were questioned. According to the latest data, the gross domestic product price index increased 5.8%. In addition, the personal consumption expenditures price index increased 6.5%. Taking food and energy costs out of the equation, the PCE price index increased 6.1%.
In line with expectations, the Labour Department reported that initial jobless claims for the week ending September 25 were up 11,000. The 4-week moving average was 340,000, up by 4,250 from the previous week's unrevised average of 335,750, according to the report.
Even though the forex heatmap had indicated that the market would be risk-on, with commodity pairs bullish versus the weakening safe-havens, the equities in the US have sold off sharply. The Dow Jones Industrial Average is down -1.11% today and the S&P500 is currently trading -0.55% lower. The monthly performance is -3.91% and -4.26% respectively.