Washington Shutdown: Mario Draghi 'Right to Expect US will Avoid Default'

Mario Draghi's expectation that lawmakers in the United States would find a way out of its political deadlock over the budget and Obamacare was a sensible call, market analysts have said.

The president of the European Central Bank said that the US government shutdown could become dangerous if it dragged out but was confident a fix would be found.

"The US budget shutdown is a risk if protracted but the impression is that it won't be," he said.

His view was line with market expectations, according to Ishaq Siddiqi, a market analyst at broker ETX Capital who spoke to IBTimes UK.

"His comments reflect the market tone that there should be some sort of resolution to this in the coming days and it is not going to turn out to be a protracted affair," he said.

"The detrimental effect on the US economy is too damaging for lawmakers in the US to quiver over something like a healthcare plan.

"If they cannot agree on something like that and essentially let the US economy go into default there is obviously something wrong with human consciousness."

Polarised politics

Yet Siddiqi said there was one positive aspect of the deadlock: it made it more likely that the Federal Reserve would delay scaling down its monetary easing programme.

However, Alistair McCaig, market analyst at IG Group, reflected that it was worrying that the US political system was so polarised that it could not pass budgets easily.

"The longer this drags on the longer the market will punish the dollar," he said.

"The shutdown will cost the government money but the potential risk side of the debt ceiling being hit and the US being unable to effectively cherry-pick which bills it can and cannot pay and therefore the likelihood of US sovereign debt defaulting would increase. The knock-on is a perilous state to put yourself under."

Borrowing costs for the US would increase, he added.

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