The DXY Dollar Index Spot is trading nearly unchanged today at 101.72, seemingly ignoring the latest news about stalled talks concerning the parliamentary vote to raise the U.S. national debt ceiling. Meanwhile, the rapidly approaching deadline will certainly serve as a major trigger of impending Fx universe’ turbulence. U.S. President Biden and Speaker Kevin McCarthy met yesterday to discuss budget priorities and raising the debt ceiling, as America is rapidly running out of cash to pay its bills.

Lawmakers have less than a month to pass legislation that would raise or suspend the debt ceiling, which limits how much the government can borrow. The U.S. hit its legal debt ceiling of $31.4 trillion on Jan. 19, and the Treasury Department estimates that its accounting operations to shore up cash reserves could be exhausted as early as June 1.

If the debt ceiling isn't raised before the government runs out of money (known as the X date), it may not be able to pay all its bills on time, including military pay, bondholder payments and Social Security checks. Without a solution, millions of Americans could lose government benefits, the stock market could crash, and it could lead to a constitutional crisis.

What can happen if the U.S. lapses the opportunity to timely raise its debt limit? Initially, investors will most likely see additional strengthening of the greenback, because many domestic financial institutions will try to cash out their high-yield and foreign investments in order to compensate for the missing scheduled budget inflows. However, in two-tree months we will most likely see a violent reversal trend triggered by massive withdrawals of foreign entities from the Treasury bills and bonds. This is still considered an unlikely scenario, but judging by U.S. CDS (credit default swaps – the U.S. 5 Years CDS value is at 65.27 (last update: 10 May 2023 5:45 GMT) – this value reveals a 1.09% implied probability of default, on a 40% recovery rate supposed – more and more investors are willing to protect themselves against any adverse scenarios in this respect.