Shares and oil prices rose strongly on Thursday amid hopes that policymakers in Washington were buckling under the global pressure for them to settle their differences and prevent a US debt default.
Washington's increasingly heated battle over raising the US debt limit could all but wipe out the country's fragile recovery, economists warned on Friday.
The International Monetary Fund said on Friday that an "excessively rapid and ill-designed" deficit reduction plan had hampered the "tepid" recovery in the US economy.
Global markets continued their rally on Wednesday as Ben Bernanke, chairman of the US Federal Reserve, made clear he had no intention of cutting short his $85bn-a-month (£56bn) quantitative easing programme in the near future.
The Federal Reserve has explicitly criticised budget cuts imposed by Congress, blaming fiscal policy for holding back the US's economic recovery.
The US economy is still too weak for the Federal Reserve to pull back from its $85bn-a-month stimulus package, the central bank said on Wednesday.
It is the crucible in which the wandering wishes of 315 million people, from Florida to Fairbanks, are shaped to the singular goal of national advancement. It is the United States Congress – verily a glorious institution – and on Wednesday it rang in a brand new session.
President Barack Obama has demanded that Senate leaders strike a fiscal cliff deal by Sunday to avert the looming US economic crisis, or face a vote based solely on his own measures.
President Barack Obama has been accused by a senior Republican of being eager to take the US over the fiscal cliff for political gain, as Washington edges closer to a year-end deadline with no deal in sight.