There aren't Too Many Drivers for USD Valuation that are Driven by the Debt Ceiling - Commerzbank

EnclaveFX Ltd
May 22, 2023

According to Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, the FX market ignores the debt ceiling, regardless of the government's actions.

It is difficult to identify the effect of the risk of default on USD to the extent that it has not moved USD to such a degree

There is no consensus in the market about what the effect of such a one-off event will be in the future. Nobody can deduce positions from their own view regarding whether or not a US default is likely to happen if no individual market participant can predict how all the others will evaluate it. As a result, we are now in a situation where the market appears to be ignoring the fact that this risk is present."

If a real default were to occur, it would mean nothing to the USD exchange rate at all, but that doesn't mean that nothing would happen!


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