Washington Weighs Down Dollar

US budget and debt ceiling worries sent stocks lower for the fifth consecutive day and hurt the dollar, The pound was the top performer while the kiwi lagged. Australian job vacancies are the lone regional report ahead of UK GDP later.

The market has turned its glare to Washington where partisan squabbles threaten to undermine the US economy once again. Congress has until Monday to pass a budget or a government shutdown will begin. At best, it looks as though some sort of provisional bill will kick the can. Democrats are taking a hard line on Obamacare and some Republicans are in no mood for compromise.

The market isn't in a mood for compromise either and it has responded with a seven-day losing streak for the S&P 500 – the longest since last year's Congressional fiscal cliff imbroglio. The dollar felt some pressure as well. Ten-year yields are at a five week low at 2.61% and there are rumors of quarter-end buying of bonds and the dollar.

Gold cheered the impasse in Washington and would stand to benefit greatly in the event of an extended shutdown or a failure to raise the debt ceiling. Treasury Secretary Lew warned of that Oct 17 is possibly D-day for the debt ceiling.

Economic data gave the Fed no fresh reasons to taper. Core durable goods orders rose 1.5% in August compared to 2.0% expected.

Notable on Wednesday was the resilience of cable. A day earlier it slumped to 1.5956 but the break of 1.6000 was hardly the signal of a broader retracement. Instead, the pair climbed to 1.6080 today. Partway through the trading day the dollar regained its footing but cable remained bid in a positive sign.

The lone indicator on the calendar in the Asia-Pacific region is Australian job vacancies for September. A month earlier, job openings fell by 7.3%. Yesterday's report from DEWR on skilled vacancies showed a 0.3% rise in the month.