ATFXWill the debt ceiling issue in the United States lead to a significant decline in the US dollar index?

2022Fiscal Year,The fiscal revenue of the federal government of the United States4.896About trillion dollars, the fiscal expenditure of the federal government of the United States is close to6.272Trillion US dollars, deficit1.376Trillion US dollars. What should we do after the deficit occurs? Of course, it is to issue government bonds for financing. If the fiscal deficit continues to occur in the following year, it is necessary to continue issuing bonds for financing. Over time, the government's debt continues to accumulate, and ultimately there may be situations where it cannot be repaid. The debt ceiling of the White House is31.4Trillion US dollars, over2022yearGDPtotal25.46Trillion dollars, the problem is very serious.


4month19Today, McCarthy launches320The main idea of the "Restriction, Conservation, and Growth Act" on page 1 is to raise the federal government's debt ceiling1.5Trillion dollars, but certain conditions must be met. “1.5The total amount of trillions of dollars should be based on2022The White House budget deficit was determined in. Not surprisingly, McCarthy's bill has a strong taste of limiting the Democratic Party's budget, such as in the future10The annual increase in federal fiscal expenditure does not exceed1%Cancel the "green tax benefits" included in the Biden government's Inflation Reduction Act, and allow the Biden government to suspend total payments4000The preferential policy for student loans with a billion dollar loan, and so on. Overall, the purpose of this bill is to10Annual reduction4.5A trillion dollar expenditure. Biden publicly stated that "strict restrictions on government spending may harm the already struggling middle class, and using these concessions to avoid a federal debt default is worse than being completely irresponsible." The White House reiterated its position that Congress should unconditionally raise31.4The trillion dollar debt ceiling, just like the three increases raised by former President Trump during his tenure. McCarthy accused Biden of being unwilling to "sit down and solve the debt ceiling" problem, and said that "the debt ceiling increase without additional conditions will not be passed." Obviously, the Democratic Party represented by Biden hopes to increase government spending to boost the economy, and the Republican Party represented by McCarthy hopes to reduce government spending to prevent the expansion of debt. The contradiction between the two sides is acute.


In fact, on the surface, the Democratic Party and Republican Party of the United States are arguing fiercely over the debt ceiling issue. In fact, the continued increase in the debt ceiling is a matter of certainty, but it cannot be accurately determined when the two parties will reach a consensus. Additionally,31.4Trillion dollars of treasury bond need to be paid in dollars, and the Federal Reserve has the right to print money. In extreme cases, the Federal Reserve will definitely print unlimited amounts of money to avoid a substantial default by the White House, which is its inevitable choice. After the Federal Reserve prints unlimited money, the US dollar index is bound to plummet, and the position of the US dollar as a hegemonic currency will also be shaken. However, as long as the Democrats and Republicans reach an agreement to raise the debt ceiling, this extreme risk will not occur.


From a purely technical perspective,2022year9Month and10In January, the US dollar index formed a triple peaked structure, and the previous bullish trend came to an end. Since the beginning of this year, the US dollar index has only2There was a significant rebound in the month, but the rebound did not disrupt the bearish trend structure. In the medium term, the bearish trend of the US dollar index continues, with a target position of100Integer level.

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There are risks in the market, and investment needs to be cautious. The above content only represents the analyst's personal views and does not constitute any operational suggestions. Please do not consider this report as the sole reference. At different times, analysts' perspectives may change, and updates will not be notified separately.

2023-04-26