US debt crisis: Capitol Hill ready to strike deal - but at what cost?

Commitment Debt

should be postponed, but the U.S. could still lose its AAA credit rating

America could soon lose its coveted AAA credit rating, perhaps later this week, while the career politicians in Washington to reach agreement to resolve the debt crisis in what is likely be a volatile week in global financial markets.

Monday morning, the dollar rose against the yen and Swiss franc as hopes grew that an agreement could be reached for the ceiling of $ 14.3tn loans for workers U.S. government to pay, and keep the country running. In early trading on the New Zealand dollar was just a little more than 30 years, while the Australian dollar has also increased.

However, although there is some relief that an outright failure of the United States in debt payments could now be avoided, there was lingering concern that Congress can not stay behind the $ 3TN cuts needed in exchange for a $ 3TN on the debt ceiling before the end of Tuesday - when the White House warned that the money is exhausted

Anxiety was evident on both sides of the Atlantic on the consequences of the crisis in the U.S., where data on Friday showed the U.S. economy picked up further heightened tensions on the market .

Danny Alexander, Liberal Democrat finance minister, told the BBC there was "quite negative consequences" if the crisis was not resolved. "Of course it depends on exactly how it developed, and I note that I do not expect that to happen. I think, finally, politicians on Capitol Hill can be seen that the consequences of cliff ... you are looking at if you want ... is someone who wants to step back.

"But it's something that would have a major effect on the global financial system, and in a global economy in the United States is one of our major trading partners, which could have implications important to the UK. "

bankers were also involved. A senior banker in New York, said. "This is political suicide almost insane proportions - and this is quite a self-made crisis The likelihood that the federal government fulfills its obligations remains very low, but the ripple effect uncertainty in the market sentiment is real and growing. "

The dollar fell to new lows against the Swiss franc and gold soared to new heights, while the political conflict in Washington has encountered problems in the euro area, where Italy and Spain are being dragged to the debt crisis. Many investors have shunned, who are willing to trade were seeking shelter,

• Louise Cooper, market analyst at BGC Partners, said. "People are very afraid of what will happen"
• Dealers said the markets needed to be sure that the failure could be avoided before trading began this week, if the sense of the world's largest economy would be restored. But with budget cuts of $ 3TN accepted by the Senate, not on the scale that art the rating agency Standard & Poor's warned that it would have to do to keep the score in the U.S. in the first class, expectations were increased triple-A rating would be lost soon.
• The head of the largest global investors in bonds, Mohamed El-Erian of PIMCO, was one of those who expected the U.S. would be deprived of their qualification.

"We have a credit rating there [P & S], which said it would reduce at least some things happen, and these things do not happen fast enough," said El -Erian ABC station in the United States, although he hopes that by default will be avoided.

Julian Jessop, chief international economist at Capital Economics, said: "It seems to be to reach agreement, but it seems none of the numbers will reassure rating agencies of the debt I 'm. pretty sure that U.S. will lose its AAA rating. "

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