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News from the US: President Obama’s suggestion that the federal government should freeze spending has been well received by the financial markets and exchange markets.

The U.S. dollar held near a 10-week low against a basket of currencies on Wednesday ahead of a statement from the U.S. Federal Reserve, which is expected to reaffirm the central bank’s focus on supporting growth.U.S. stock index futures ticked higher after President Barack Obama delivered the annual State of the Union address, pointing to a modestly firmer opening on Wall Street on Wednesday.

Obama proposed a freeze on domestic spending over the next five years to help reduce the national deficit but analysts said the speech provided no surprises.

The idea is to minimize the deficit, which will allow–without fear of inflation–some expansion of money supplies, which–among other things–will keep the value of the dollar low against other currencies and encourage exports out of the US.

All a good idea for the US, but probably not realistic politically. Government spending in the US is decided by Congress, not the Executive branch, and I do not think Congress has the ability to freeze spending levels.

We will see, but I think we will see a reversal in policy.

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