If by some miracle they do a deal, what’s the trade?
Let’s suspend disbelief and pretend for a moment a moment that the powers that be in Washington put together a debt deal that ticks most of the boxes: Lasts through the election, cuts spending $3-4 trln, and starts to tackle entitlement reform. (We can dream).
What would be the way to trade that outcome?
Trading EUR/USD on a risk-on/risk-off proposition seems a very dicey way to play, for my money. A better bet, to my mind is a cross play. Selling CHF/JPY would seem to be the way to play here. It may prove a bit less volatile than USD/CHF and EUR/CHF while still capturing the unwinding of some of the built-up safe-haven plays. Negative cost of carry is also minimal.
Stick a stop above 98 and look for a move to the 94.50/95.00 area if (a BIG if) an agreement is reached.