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Forex Flash: US technical default the next hurdle – Westpac
FXstreet.com (Barcelona) - The tail risks associated with the
upcoming debt ceiling debate are larger, the confrontation between
Democrats and Republicans is not as lopsided as many assume and a
specific end date to focus negotiations in late February is
lacking. Combined, these factors suggest markets face a much
rockier road in February than was the case with the fiscal cliff.
As many have highlighted, the tail risks associated with the upcoming debt ceiling debate are larger. According to the Westpac Analyst Team, "The ramifications associated with going over the cliff pale in significance next to the possibility of a technical default by the US Government that may occur if Congress fails to raise the statutory US borrowing cap. The confidence shock to the economy and markets would be larger and the governance failure would prompt sovereign ratings downgrades."