Markets were upbeat on the first trading day of the new year after news that the U.S. will be averting the so-called fiscal cliff. Lawmakers in Washington approved a budget deal literally by the “eleventh hour” which would help prevent massive tax increases and government spending cuts that would have dragged the American economy back into recession.
After talks over the weekend and into Monday the Republicans and Democrats reached a deal on a budget deal. The U.S. House of Representatives passed the budget legislation just after 11 p.m. in Washington yesterday.
The bill was passed by a vote of 257 against 167 and finally breaks a yearlong gridlock on negotiations over the tax increases and spending cuts worth $600 billion. The bill will now go to President Obama for his signature.
“This law is just one step in the broader effort to strengthen our economy,” Obama said at the White House. He said he hoped Congress this year would handle budget issues “with a little bit less drama, with a little less brinksmanship.”
The budget deal bolstered appetite for risk currencies like euro and sterling and also currencies which typically benefit from expectations of global economic growth, including the aussie. Currencies of countries with strong ties to the U.S. in terms of trade also benefitted, such as the Canadian dollar and the Mexican peso.