Countdown to the fiscal cliff
With 2013 less than a day away, so too is the fiscal cliff. Stuck at an impasse, Republicans and Democrats seem unwilling to budge on their political stances to reach a solution. Resultantly as the New Year starts, so will the $600bn of tax rises, tax cut expiries and spending cuts.
Meeting from 11.00am Eastern Time, congress will look to hash out a deal that would prevent the US economy facing the austere measures that could prompt the nation to enter recession in 2013, as has been widely predicted. With both sides accusing each other stalling and lacking urgency, whether or not a compromise will be found by the end of today isn’t a certainty either.
If a deal isn’t made today, the pedestrian nature with which a deal has been approached is underlined by the possibility that a retrospective agreement can be sought. As time has gradually ticked by, risk appetite has slowly eroded; consequently we have seen the dollar get stronger and this may continue unless any progress can be made.
The euro remarkably has remained buoyant in recent weeks as investor confidence has sustained following the ECB’s successful battle to secure Greece’s short-term future in the currency. Whether or not this will continue beyond the New Year is uncertain, though the fact that the single currency has survived 2012 intact is an achievement in itself.