US dollar and Euro markets fall as debt ceiling debate stalls; Wall St suspects US downgrade even if agreement reached (+ analysis); Australian inflation on the rise; Bueraucratic delays to Somalia flights; Breivik on suicide watch; Suicide bombing kills Kandahar mayor; and more

Top of the Agenda: Global Fears Over US Debt Impasse

As Republican and Democratic plans for raising the US debt ceiling ahead of the August 2 deadline stalled, the dollar fell (WSJ) to a new 2011 low against the yen and a record low against the Swiss franc.

Wall Street bondholders worry that even if a last-minute agreement is reached, the political deadlock and lack of a significant deficit-reduction package could still spur credit rating agencies to cut the nation's long-held credit rating (Bloomberg) of AAA. Such a move alone, which could add $100 billion a year to government costs while increasing treasury yields, would likely damage US credibility (Politico) on the global stage and shake international investors.

European stocks (Reuters), responding to the US impasse and eurozone debt worries, fell for the third consecutive day on Wednesday.

At a speech at CFR on Tuesday, IMF Managing Director Christine Lagarde (FT) urged US lawmakers to take bold fiscal action and raise the debt ceiling in order to avoid severe global consequences.

Analysis:

As partisan wrangling over the US debt ceiling continues in Washington, fears are mounting that a default could trigger another global economic crisis. This CFR Issue Guide offers timely analysis on the global implications of the US debt crisis.

Christine Lagarde, the newly appointed Managing Director of the International Monetary Fund, discusses the IMF's changing role amid growing concerns over US and Eurozone debt with Tom Glocer, Chief Executive Officer of Thomson Reuters.

The Financial Times' Lexington column argues that holders of US treasuries have few other places to go, and that it's never safe to bet against the world's richest and most powerful country.

 

PACIFIC RIM: Inflation Rises in Australia

Australia's annual pace of inflation jumped (Australian) to 3.6 percent in the second quarter, as the Australian dollar hit a twenty-eight-year high against its US counterpart, aided by the US impasse over raising its debt ceiling.

South Korea: South Korean Vice Defense Minister Lee Yong-gul and Chinese Air Force General Ma Xiaotian led the first-ever strategic defense talks (Yonhap) between South Korea and China in Seoul, as the region faces continued uncertainty over North Korea's military ambitions.

 

ELSEWHERE:

- Kandahar Mayor Killed
- Somalia Airlift Delayed
- Norwegian Terrorist on Suicide Watch, Review Promised

 

This is an excerpt of the CFR.org Daily News Brief. The full version is available on CFR.org.