Thursday October 17, 2013 08:31
We suggested on Monday that a deal had been fully priced into the market and that the quality of the deal was important. The deal was finally accomplished but, in the eyes of the market, a three month extension was ludicrous. The leaders in Washington were focused inward and truly have no sense of the damage that was caused in the eyes of the international community. The Europeans are very uncomfortable with their current economic situation and the possibility of a dollar debt default was not a game in their minds. The game will once again begin at year-end and, in the interim, short-term T-Bills are questionable, where the majority of the international market parks its short-term US dollar holdings. The USD took the hit overnight and the shorts in the metals that were hoping for at least a one year extension, scrambled in a thin Asian market. The Fed will also have no option but to continue easing as the recent debacle will slow fourth quarter growth. The key to the metals will be the markets belief on whether bi-partisan resolve to tackle the budget deficit is now in play. The market traded near our upper end range of $1,325 overnight, where some profit taking appeared. The market will remain very choppy in this environment.