The current row about the US debt ceiling is slowly becoming an issue for FX analysts. It has always worked out in the end, nonetheless, from the point of view of Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, there are reasons why we should not ignore the debt-ceiling issue completely.

How to deal with the US debt ceiling event risk?

“In conversations, I am often told: it has always worked out in the past; the debate about the debt ceiling is part of the US political foofaraw, in the end an agreement is always reached. And indeed, I tend to agree with that point of view.”

“And please do not believe that the USD levels would correctly reflect this event risk! How risks are valued on the market depends on the risk profile of the ‘average market participant’. At first glance that is a rather hazy concept, but the formal definition is not trivial, and for our purposes a rough idea is quite sufficient.”

“It is not a case of creating a panic if I suggest keeping an eye on the event risk of fiscal chaos in the US and the possible USD negative effects if you are going to enter USD longs. Even if it is likely that it will all end well yet again.”