The US dollar is near the lows of the day as American traders return from a long weekend and digest the debt ceiling deal.

Early debt ceiling deal estimates suggest the impact on the real economy will be limited to -0.1% to -0.2% and become the most acute in late-2024, according to BMO. That's a small drag but not a surprise.

We'll spend the remainder of the week watching Congress finagle a deal but at least we won't have to go down the debt ceiling road again until January 2025. The House should first vote on it Wednesday with the Senate to vote on the weekend but that's a moving target.

A fall in T-bill yields on the deal isn't a surprise but few were expecting a drop right across the curve. US 10-year yields are down 11 bps to 3.71%, reversing nearly all of last week's gains. It's not clear why yields further out should be falling unless there were those pricing in a long-term default. Many were expecting yields to rise on a wave of Treasury supply post-deal.

In any case, the falling yields are weighing on the US dollar with cable particularly strong, up 80 pips to 1.2431 and near a session high.

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