THE TAKEAWAY: House Republicans decide not to vote on ‘Plan B’, inching closer to falling off the Fiscal Cliff > Thin markets and quadruple witching helped push risk sensitive assets lower
Risk trends collapsed momentarily as thin market liquidity combined with the announcement that House Republicans decided not to vote on Boehner’s ‘plan B’ tax plan tonight.
Both republicans and Democrats have until the of the year to decide on budget cuts and tax increases before previously negotiated tax hikes and spending cuts kick in and potentially send the US economy over the Fiscal Cliff and into recession.
Volatility in the markets may be extreme this coming U.S. trading session as many financial products are set to expire known an quadruple witching. Traders may opt to re-establish these positions which should accelerate price volatility.
Today’s news and market conditions provided the catalyst for extreme selling pressure on the S&P 500 futures and modest selloff on AUD/USD and EUR/USD currency pairs.
S&P 500 Futures, 1 Minute Chart
EUR/USD, 1 Minute Chart
AUD/USD, 1 Minute Chart