As expected, the House of Representatives voted for raising the U.S.debt limit ; this approval was made possible after very long deliberations over the weekend between Democrats and Republicans; in the end, the two parties agreed to raise the US debt ceiling, which has reached its cap at $14.3 trillion, to $16.4 trillion an increase of $2.1 trillion. The agreement also includes cutting the federal budget deficit by $2.5 trillion over the next decade. On the other hand, the plan doesn’t include raising taxes.
The deadline for raising the debt limit was August 2nd , after that deadline had the U.S. didn’t raise the debt limit, it would have defaulted on its debt. This increase should suffice the US economy for the next couple of years to 2013.
Major rating agencies including Moody’s Investors Service, Standard & Poor’s and Fitch Ratings claimed in the past that the US’s AAA credit rating isn’t secure even if the US will raise the debt ceiling on time.
The initial reaction of the financial markets to this news was that crude oil prices and gold price declined yestreday, and the US dollar strengthened against major currencies including the Euro and Canadian dollar.
Current Nymex crude oil price, short term futures (September 2011 delivery) is traded up by 1.47%, at $97.17 per barrel as of 07:54*.
Current gold price, short term futures (August 2011 delivery) is traded at $ 1,616.60 per t oz. a $14.6 decrease or 0.90%, as of 07:51*.
Euros to USD is currently traded up at 1.4404 a 0.0395% increase as of 08:01*.
For more on this subject:
- U.S. GDP 2011 Q2 rose by only 1.3%
- US Federal deficit declined to $43 billion in June
- Weekly outlook for August 1-5