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Forex pairs in this Article » EUR/USD (London) - Yesterday’s eleventh hour agreement to extend the debt ceiling saw some risk-on gains, but response was muted with the knowledge that the arguments that had shut down the government this time had simply been postponed until early next year.

The bill to funds the government until 15 January 2014, and pushes the debt limit out until 7 February.

It passed through Congress easily, with an 81-18 vote in the Democratic-controlled Senate, followed by a 285-144 vote in the republican-controlled house.

The vote ends a 17-day shutdown that has dragged on the economy by an estimated USD24bn.

Any relief rally in the dollar is likely to be short-lived, for both political and macro reasons as congress heads into yet another bitter battle once this extension expires. On top of this, the Federal Reserve’s Beige Book release yesterday reported that there was only “modest to moderate” growth overall in the US economy, with “an increase in uncertainty” thanks to the government shutdown.

The S&P gained 1.38 percent in advance of the deal, while the Dow added 1.36 percent.

The Nikkei gained by 0.61 percent overnight.

USD/JPY lost 0.33 percent to JPY98.4400, shedding all it’s Congress-induced gains.

AUD/USD lost 0.03 percent on choppy trading to USD0.9548.

In the day ahead, the UK will look to retail sales for September for signs that it is continuing its steady recovery - consensus +0.4 percent month-on-month, reversing a 0.9 percent drop in August.

With government agencies now back to work, we should soon see US data back to normal, though it will take some time to clear the backlog. In the interim, initial jobless claims (consensus 335K) and the October Philadelphia Fed survey are due( consensus +15, down from +22.3 in September).
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