US fiscal cliff negotiations bring in wise money market volatility

As the wise money markets move into the New Year most of the focus turns towards the US markets.US fiscal cliff negotiations bring in wise money market volatilityPresident Barack Obama has had to race against time to save the deal on the fiscal cliff reforms- amidst rife opposition against the planned tax reforms and spending cuts.

Overnight, the US senate reached an agreement on a fiscal package which analysts speculate would reduce economic growth by more than a half a percent if implemented.

With the US Treasury hitting its ceiling on its $16.4 trillion debt limit, the US House did pass a bill as per Obama’s plan of increased taxation on households.

As per 2012 projections, the tax hike will bring in $620 billion in the next 10 years.

With the tax bill being passed, the next battle is likely to ensue on the spending cuts to be implemented, for the deficit reduction program.

To look back and review 2012, Italian and Portuguese bonds and European Stocks rallied through efforts by the European policy makers to contain the market turmoil that threatened to destroy the single currency region.

However, with most of the focus on the US, expect the single currency to continue to remain strong against the Greenback, in the short term, as EUR/USD moves towards the 1.33 level.

From the UK, Sterling has also managed to climb to 1.63 levels against the US Dollar, as optimistic markets bring in the New Year, on the back of the fiscal cliff developments.

The UK markets are also expected to be upbeat on the housing market which is expected to bounce back in 2013.

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