US President Joe Biden and senior Republican Kevin McCarthy will spend this week attempting to convince Capitol Hill legislators to pass a deal to raise the US debt ceiling, which was agreed by the two men over the weekend.
One investor hailed the deal as “great news,” minimising the chance of the US government defaulting, but Congress is still to have its say amidst complaints from some Democrats that the President has given up too many concessions.
“It takes a threat of catastrophic default off the table, protects our hard earned and historic economic recovery,” Biden said of the deal.
American stock markets were closed yesterday for Memorial Day, but Wall Street futures rose and the price of short-term credit default swaps fell.
City economists will be closely watching reports this week into the state of the US job market, with concerns that the market “seems to be running hot,” in the words of AJ Bell analysts.
Some analysts had suggested the US Federal Reserve had reached the top of its rate-rise cycle, at 5 to 5.25 per cent, but if the job market continues to heat up it is expected the Fed will increase rates to prevent a wage price spiral and the risk of stickier-than-anticipated inflation.
“While the White House’s debt ceiling agreement is great news, the US government still has a cash flow problem and time is of the essence to finalise the agreements,” said Bob Stark, global head of market strategy at treasury and financial management firm Kyriba, to Reuters.
“The debt ceiling agreement is only the first step in saving the government from the brink of illiquidity,” they added.