President Barack Obama asked Congress to adopt a mix of revenue increases and spending cuts to tame the nation's long-term budget deficits, in a combative speech that portrayed Republicans as backing "tax cuts for millionaires and billionaires" while demanding sacrifice from the nation's seniors, poor and the middle class.

President Obama Wednesday called for Congress to commit to "across-the-board" cuts in spending as well as tax increases if the national deficit isn't brought under control by 2014. Damian Paletta has details from Washington.

The speech, which appeared to leave Republican leaders furious, was Mr. Obama's most substantive step into the debate over the nation's fiscal future, an issue that both parties say is a matter of national security and which is likely to dominate the 2012 elections. Mr. Obama called for Congress to cut deficits by $4 trillion over 12 years and commit to automatic, across-the-board spending cuts and tax increases if an initial target is not met by 2014.

Eoin Treacy's view The USA has lagged other major markets in tackling its budget deficits. While the Eurozone and UK have rediscovered a zeal for fiscal austerity and a large number of economies have begun to normalise monetary policy, the USA has so far refused to embrace the need for spending cuts and/or revenue raising exercises. One might argue that the depth of the recession was such that the economy was not previously robust enough to absorb such tightening but this does not negate the need for such measures. Rep. Paul Ryan took a bold step a few weeks ago in drawing attention to the size of the task. President Obama's riposte yesterday clearly indicates that this is finally an issue which can no longer be side stepped.

US 10-year Treasury yields have experienced two dramatic falls in the last two years. Both were fuelled by fears of deflation and were directly aided by the Federal Reserve's quantitative easing. With the end of the latest such program quickly approaching and the rate of purchases forecast to increase there remains some potential for an additional short-term decline. The prospect that the nation's fiscal mess is about to be faced up to should also help to support prices.

However, longer-term the Fed is targeting inflation. Yields have been on a 30-year downtrend and base formation appears to be underway. A sustained move below 3% would be required to begin to question medium-term prospects for higher yields

The US Dollar Index has fallen persistently for the last three months. It is currently oversold in the very short-term and in the region of a prior area of support near 75. However, a clear upward dynamic will be required to indicate that demand is regaining the upper hand.