EUR/USD close to eight-month highs as US government shutdown was triggered

The euro traded in proximity to its highest point in seven months against the US dollar on Tuesday, after the US government embarked on a partial shutdown, as Congress did not reach an agreement on the next fiscal period budget.

EUR/USD reached a session high at 1.3586 at 6:54 GMT, after which consolidation followed at 1.3576, gaining 0.36% for the day. Support was likely to be received at September 30th low, 1.3476, while resistance was to be encountered at January 31st high, 1.3618.

US government began a partial shutdown today, after policymakers debate regarding the budget and President Obamas healthcare law did not come to an agreement about the endorsement of the new fiscal year funding, starting today. This shutdown appeared to be the first since 1996. The lack of funding for the new fiscal period will leave thousands of governmental employees without a job, national parks will be closed and certain governmental services will not be available. President Barack Obama said on September 27th that failure to approve funding to keep the government open and to lift the debt ceiling would cause a destabilizing effect on the economy. Shutting down the government would reduce the economic growth in Q4 by as much as 1.4%, depending on the length of the shutdown, Bloomberg imparted. The US Treasury has warned that measures to prevent breaching the debt ceiling will be exhausted on October 17th.

“The yen, the pound and, to a lesser extent, the euro have all benefited from the uncertainty,” said Andrew Salter, a foreign-exchange strategist at Australia & New Zealand Banking Group Ltd. (ANZ) in Sydney, cited by Bloomberg. “Those currencies are reserve currencies with financial markets that can accommodate a flight to quality.”

Meanwhile, markets were focusing on the series of manufacturing PMIs out of the Euro zone countries, German and Euro zone unemployment rates, while the United States will publish a report on manufacturing PMI later on trading Tuesday.

Elsewhere, the euro was steady against the pound, with EUR/GBP cross dipping a mere 0.02% on a daily basis to trade at 0.8357 at 7:57 GMT. EUR/JPY pair was losing 0.07% to trade at 132.87 at 7:58 GMT.