Why the USD is likely to struggle into year-end

FXstreet.com (Barcelona) - While the U.S. may have struck a deal to avoid default and re-open the government, there are some immediate negative consequences for the USD investors should be reminded in the coming weeks.

As Richard Franulovich, Senior Currency Strategist at Westpac, notes: "Most US economic data in coming weeks will be weak and corrupted due to the dysfunction in Washington."

Another negative driver for the USD is likely to be a delay in QE taper, with Franulovich noting "a Yellen led Fed and a couple months of corrupted data warn tapering may not be a serious chance until well into 2014, possibly Q2 at the absolute earliest."

Lastly, Franulovich thinks that the Fed will continue to err on the side of caution, saying: "Even in the unlikely event that US labor market shows substantial improvement in early 2014 there is every chance the Fed may want to sit on the sidelines amid another potential round of Washington brinksmanship early in the new year, just as they did in September."

"There is potentially another Washington fight over funding the government and raising the debt ceiling early next year as well."