US debt ceiling could trigger pick-up in FX volatility and temporarily disrupt USD weakening – MUFG

Economists at MUFG Bank look into potential implications for the USD from the debt ceiling stand-off.

Time to pare back some short USD exposure

“The fast approaching US debt ceiling stand-off has the potential to create choppy price action as well in the coming weeks/month that could temporarily disrupt our outlook for further USD weakness.”

“The more last minute the deal, the more disruptive it could be for financial markets.”

“Once the dust has settled over the US debt ceiling, we expect the USD to resume its decline but are anticipating more volatile FX markets as the ‘x-date’ approaches.”