US budget sequester pressures Australian dollar

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From AAP:

President Barack Obama has accused Republican rivals of threatening the fragile US economic recovery by failing to move forward on his deficit reduction plan before severe budget cuts kick in.

Mr Obama said that by refusing to allow a vote on a Senate bill that includes a balance of tax revenue and targeted spending cuts, Republicans are “threatening our economy with a series of arbitrary, automatic budget cuts that will cost us jobs and slow our recovery”.

Two competing bills aimed at averting huge spending cuts have failed in the US Senate, including a Republican effort that would have given power to the White House to implement the cuts.

Both bills fell short of the 60 votes needed to advance, virtually assuring that the $US85 billion ($A83.43 billion) in across-the-board cuts known as the sequester will kick in.

…The flame-out over the sequester heaps pressure on Mr Obama and the four congressional leaders he meets with Friday at the White House to “discuss a path forward”.

That’s 0.5% of US GDP up in smoke. The ASX has held up pretty well but the dollar is under the pump again:

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As Chris pointed out yesterday in “ASX at the close“, the local share market is in a win-win at the moment, especially on news flow from the US. Bad news means more rate cuts here or a higher USD and lower AUD. Good news means better earnings.

About the author
David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.