Despite the last minute cobbling together of a deal over the US budget things are still not settled as the agreement only lasts a few months. Ms. Christine Lagarde, Managing Director of the International Monetary Fund (IMF), issued the following statement pointing out that the US should get its financial house in order:

"The U.S. Congress has taken an important and necessary step by ending the partial shutdown of the federal government and lifting the debt ceiling, which enables the government to continue its operations without disruption for the next few months while budget negotiations continue to unfold.

"Looking forward, it will be essential to reduce uncertainty surrounding the conduct of fiscal policy by raising the debt limit in a more durable manner. We also continue to encourage the U.S. to approve a budget for 2014 and replace the sequester with gradually phased-in measures that would not harm the recovery, and to adopt a balanced and comprehensive medium-term fiscal plan."

Many put the problem in starker terms.

For example Nawaz Ali, UK Market Analyst for  Western Union Business Solutions, said:

"The US dollar quickly retreated from session highs on Wednesday following news that Washington has agreed an eleventh-hour deal to avert economic catastrophe and re-open the US government today.

Flag of the USA -

Flag of the USA –

"Whilst positive for global financial markets, the deal will only fund the US government until 15th January next year. The US economy is carrying an open flesh wound that has simply been bandaged up by the temporary deal. 

"This short-term debt fix and the prospect of yet another US government blackout following last night's developments will weigh heavily on the US dollar, and could unravel the Fed's tapering plans.

"Investors will now measure the damage done to the US economy following the 16-day shutdown in Washington, which is expected to add pressure on the Fed to keep its monthly quantitative easing programme at full speed. The prospect of more easy money could see the US currency and other safe havens such as the Yen and Swiss Franc lose ground against higher yielding and more risky currencies."

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