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The Greenback Slips Further as Traders Wrestle with Post Shutdown Scenarios

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The Greenback Slips Further as Traders Wrestle with Post Shutdown Scenarios

The dollar was on the defensive out of the gate on Friday as investors shied away from the greenback as yields moved against the US currency. Rates in the US moved lower as investor began to focus on quantities easing and the notion that Janet Yellen would likely be confirmed as the new head of the Federal Reserve, keeping the Feds bond purchase program in tact until the first quarter of 2013.

A consequence of the government shutdown, beyond the disappointment displayed by the American people at their leaders is the effect on monetary policy. There is a strong likelihood that the Fed decided not to taper its bond purchase program was because they foresaw a situation where a shutdown would impede future growth. With Janet Yellen likely to be the next Fed Chairperson, the earliest tapering decision is likely to commence sometime in 2014.

Market participants will also have to prepare for next week’s release of US government data which has been delayed because of the shutdown. The Department of Labor has published an updated schedule for US data releases. September jobs data will now be reported October 22 vs. October 4 while September PPI and CPI will be reported October 29 and 30, respectively. The October jobs report is now scheduled for November 8 vs. November 1 originally.

In economic news, Chinese third quarter Gross Domestic Product printed at 7.8% year over year, in line with expectations while second quarter GDP was revised higher to 1.9% from 1.7%. On a quarter over quarter basis, growth rose by 2.2%, suggesting an annualized rate of growth of 9.1%Industrial production printed near 10% year over year while Retail sales grew at 13.3%.

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