Possibility Of Fed Taper Seen Less Likely

The euro rose against the dollar on Friday morning and traded above $1.36 despite US efforts to overcome the drawn out budget battle that took the nation to the brink of default. The US government agreed to pass a last minute bill that reopened the government and extended the country's borrowing authority just hours before the deadline. Related: Market Primer: Friday, October 18: S&P 500 Hits Record High, Dollar Suffers However, the deal itself has caused concern among investors who see it as merely postponing another battle between Democrats and Republicans. The bill will fund the government until January 15 and raise the debt ceiling until February 7th, which means the same problems will likely surface again early next year. Reuters reported that the uneasiness has caused many to believe that the US Federal Reserve will not consider tapering its $85 billion per month bond buying plan until at least March 2014. After the bank surprised markets by not beginning the taper in September, investors were expecting to see the bank cut down on its stimulus spending at its December meeting. However, the damage from the government shutdown coupled with the possibility that the nation could face the entire situation again in a few months will likely keep the US central bank from a taper any time soon. In the eurozone, bond markets have been picking up as the problems in the US together with improving economic forecasts and the possibility of more liquidity from the European Central Bank enticed investors. Recent bond auctions in both Spain and France saw strong demand and ended with better than expected results.