President Biden and Speaker McCarthy are expected to hold another round of key debt ceiling negotiations today. Given the high risk that no tangible progress is made, upside risks for safe havens (USD and JPY) are elevated, economists at ING report.

A key day for debt-limit negotiations

“This should be another pivotal day in Washington for debt ceiling negotiations, with President Joe Biden expected to meet Speaker of the House Kevin McCarthy. Biden is still scheduled to leave for the G7 meeting in Japan tomorrow, and the White House has so far said there are no plans to curtail the trip for the debt ceiling impasse.”

“Should we see no progress towards a debt-limit deal today, we could definitely see markets price a greater deal of the US defaulting on its debt. The potentially very negative spill-over into risk sentiment and money markets means that the upside risks for the Dollar and the Yen are quite significant in such a scenario.”