The final week of this year is upon us, and it holds the last days for the Congress battle over the Federal Budget; whether the U.S will go into the automatic fiscal cliff, or the Democrats and Republicans will find compromise in order to avoid that threat remains markets concern.
Congress negotiations are still apart over the tax increases and spending cuts for the next decade, to avoid the fiscal cliff’s harsh consequences on the U.S economy, which even the Fed’s eased monetary policies cannot contain.
The debate took a rugged turn this week, as the House of Representative declined to approve House Speaker John Boehner’s “Plan B”, shortly after President Obama warned he will “Veto” against the plan.
Boehner’s offer entailed raising taxes on those who earn over 1 million, increasing revenue by 1 trillion, in contrast to Obama’s last offer which is to raise taxes on those who earn over 400 thousand, 1.2 trillion in revenue.
During the week, attention will turn to the Chicago Purchasing Managers Index (PMI), which is expected to rise to 51.0 from October’s 50.4.
Consumer Confidence Index, also set for release, is expected to show a decline in Confidence levels in December, mainly affected by the fiscal cliff crisis, which should dominate the market sentiment until the start of 2013.
Generally speaking, the fiscal cliff is all what matters in the upcoming period, and markets will be anticipating the crucial outcome of the negotiations next week.
On the Other hand, the upside of this time of the year will be Christmas, and financial markets will be closed on 25 December; with short trading session on Monday.