The lukewarm market reaction to the end of the US government shutdown and the suspension of the debt ceiling can largely be explained by the fact that the chances of default were already assumed to be very low. What's more, the reassuring signals from Washington in the past few days meant that any relief rally had already happened by the time the agreement was confirmed. However, the short-term nature of the deal has also left some investors worried that the whole crisis will simply be repeated in a few months' time. While we think that assessment will prove to be too pessimistic, the credibility of US policy-making has been dealt another serious blow.
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