ANZ Morning Brief: Progress on the Fiscal Cliff?

PROGRESS ON THE FISCAL CLIFF?  Global markets are taking a breather from worrying about Southern Europe . Greece , Spain et al will be back, but in the meantime, headlines regarding the US “fiscal cliff” are grabbing all the attention. On Friday, there were some positive ones that turned market sentiment around. Republican House Speaker John Boehner said his meeting with President Obama was “constructive”, and “outlined a framework for taxes and spending,” and that he in exchange “put revenue on the table”. Senate Majority Leader Harry Reid (Democrat) acknowledged that “both sides will have to give something up”. Heart-warming words, but the devil will be in the detail. With the election out of the way, optimists are hoping that the environment will be more conducive to cooperation, enabling the nation to avoid abrupt automatic austerity measures that all agree would be a heavy setback to the emerging recovery. They need only look over the ditch at the damage being wrought by severe austerity measures in Europe to see that a more gradual and targeted adjustment path is probably worth the effort.

Israeli PM Benjamin Netanyahu not preparing to slow assaults on the Gaza strip any time soon: “We have extracted a heavy price from Hamas and other terrorist organizations, and the army is prepared to significantly widen the operation.” Meanwhile US President Obama commented, “We will continue to support Israel ’s right to defend itself.” So far 60 Palestinians and 3 Israelis have died in the recent escalation of tensions.

NZD/USD: Fiscal cliff progress…News of bipartisan progress on the fiscal cliff gave risk a boost on Friday. We would need sustained progress for this to continue, and given Congress has its Thanksgiving shutdown this week, that is unlikely. Expected range: 0.8060 – 0.8140