"Because it's happening all at once, so quick, so fast, unplanned; it's going to hurt. We can absorb it, but it still hurts."
- Beth Ann Bovino, U.S. chief economist at S&P
The most popular currency pair EUR/USD hit the highest since February, reaching 1.3678 amid concerns the budget deal is only a temporarily solution to the problems of the United States. Furthermore, jobless claims and manufacturing reports seems to have a muted impact on markets. Nevertheless, the government is working again and the default is averted, hence, it is time to assess the potential damage caused by a 16-day shutdown. Though the world's largest economy has dodged an economic catastrophe, it did not emerge from the political debacle unscathed, while the partial government shutdown took a $24 billion chunk of the economy. As a result, the rating agencies like the S&P, are projecting a 2.4% growth in the fourth quarter, down from almost 3% predicted prior the shutdown. The estimated loss of $24 billion is only 0.002% from a 16-trillion economy; however, it means that the similar economic and structural problems, which was recently solved, will be a threat once again. Additionally, the Federal Reserve is holding a meeting on October 29, where analyst expected Bernanke to announce tapering of its stimulus; however, taking into account recent development, the tapering is expected to be delayed. Also Thursday, one of the top analysts in the United States claimed the economic impact of government shutdown and last-minute budget deal could be worse than the 2008 economic crisis, when Lehman Brothers collapsed. The last but not least, the S&P was minutes ago from downgrading the U.S. credit rating.
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