Debt Ceiling Like Virginity: Buffett on Getting Rid of the Ceiling

October has seen the US dollar driven primarily by political bickering in Washington; first we had the government shutdown then we moved onto will they / won't they raise the debt ceiling.

The retail investor's god, Warren Buffet, gives his thoughts on the debt ceiling:

News that a short-term has been agreed to end the partial government shutdown and avert a sovereign default triggered initial USD gains overnight.

However the move was short-lived.

In the longer-term, the government shutdown has already hampered economic activity in Q4, due to lost output and reduced government spending; but has also likely impacted consumer and business confidence.

Furthermore, the short-term deal only delays the tough Budget decisions until the new year. This will likely see economic confidence and US growth remain subdued for a longer period. The end of the government shutdown will see market focus turn to the data releases that were due earlier this month.

However, the Fed will unlikely gain a clear picture of economic activity in Q4 with upcoming data likely to be compromised by the government shutdown, and with US fiscal negotiation risks early next year, the prospect of QE ’tapering’ in December have significantly reduced. Therefore there is little reason to be positive USD in the medium term.