U.S. debt ceiling debate sends Dollar higher
The Dollar continued to strengthen on Wednesday, despite debates in Washington raging on, over the country’s debt ceiling.
Tensions grew with the deadline to suspend or extend the ceiling coming on Thursday, with many believing a stalemate could lead to a government shutdown.
|💡 What is the debt limit, and how close is the U.S. to reaching it?|
The debt limit is a cap on the total amount of money that the federal government is authorized to borrow to fulfill its financial obligations. Technically, the United States hit its debt limit at the end of July, following a two-year extension that Congress agreed to in 2019.
Current debt stands at $28.43 trillion, or over 1.35 times the U.S GDP last year ($20.93 Trillion)
News of this comes as markets gear up for the Federal Reserve beginning to taper its asset purchasing program, with a rate hike also expected next year.
GBPUSD continued to fall in today’s session, hitting an intraday low of 1.3411, which is its lowest rate since December 2020.
EURUSD was also lower, falling to its weakest level this year, trading below 1.16.
Shanghai Composite lower as China coal crisis worsens
In China, the Shanghai Composite traded lower on Wednesday as the country’s coal crisis continued to impact investor confidence.
Supply of coal within the world’s second largest economy slowed in recent weeks, as the country heads into winter, with the country’s electricity council stating that it will pay, “any price to ensure heating and power generation in winter”.
|💡 Is coal still king? |
With natural gas prices at record levels the world is competing for finite supplies of coal. The dirtiest fossil fuel, which was struggling against cleaner energy sources, is now seeing its biggest comeback ever, complicating international climate talks set to begin in just a few weeks.
There have been numerous bottlenecks in the supply of coal and other energies in recent months, leading to prices of these commodities trading at multi-year highs.
In Europe, the price of coal has risen to a 13-year high, with Australian coal surging by as much as 250% within the last year.
The Shanghai Composite closed 1.83% lower on the news.
Oil prices rebound, despite rise in inventories
Oil prices were also higher in today’s trading session, despite data from the United States showing that stockpiles had risen.
Data from the American Petroleum Institute showed that stockpiles of crude increased by roughly 4.2 million barrels in its latest weekly report.
Wednesday’s rise puts an end to a sequence of nine consecutive weeks of declining inventories, with today’s rise the biggest increase since April.
|💡 Biden administration asks OPEC for lower oil prices|
The Biden Administration continues to speak with OPEC about the importance of mitigating high oil prices to better support the economy, White House Press Secretary Jen Psaki said on Tuesday as Brent Crude prices hit $80 per barrel for the first time in three years.
After falling to an intraday low of $73.85 earlier in today’s session, WTI crude rose to a high of $75.89.
Price of Brent also remained close to multi-year highs.
Quote of the day – “It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you’ll do things differently.”– Warren Buffet