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U.S. Posts $86 Billion December Budget Deficit; USD/CAD Gains

U.S. Posts $86 Billion December Budget Deficit; USD/CAD Gains

Trang Nguyen,

THE TAKEAWAY: U.S. Budget Deficit Narrowed in December > Gain in Monthly Receipts Larger than Increase in Outlays > USD/CAD climbs

The monthly budget statement released today showed that the deficit for December narrowed to $86 billion from $137.3 billion in the previous month while economists widely expected a deficit of $83.7 billion. The gap between spending and revenue was reduced in the month as an increase in receipts is considerably larger than a gain in outlays. Receipts climbed to $239.96 billion from $152.40 billion in December while outlays rose to $289.70 billion from $325.93 billion. From a year earlier, total receipts grew 1.3 percent while total spending expanded 3.5 percent.

U.S. Monthly Budget Surplus/Deficit ($BLN): September 2008 to Present

011212_US_Monthly_Budget_Statement_December_body_Chart_1.png, U.S. Posts $86 Billion December Budget Deficit; USD/CAD Gains

Prepared by Trang Nguyen

U.S. government ran its 39th straight monthly budget deficit in December; however the fiscal year to date improved, decreasing by $47 billion. The budget deficit being eased helps save the U.S. fate. Standard and Poor’s for the first time downgraded the U.S.‘s AAA credit rating one note to AA+ in August mostly due to the lawmakers’ failure in reducing the more than $1 trillion budget deficit. The rating is threatened to be cut to AA within two years if budget deficit continues to be higher than agreed to. $86 billion deficit in December push the total budget shortfall for the first quarter of fiscal year 2012 to $322 billion. For the next presidential race, President Barack Obama may offer more proposals to reduce deficit in his fiscal 2013 budget plan.

USD/CAD 1-minute Chart: January 12, 2012

011212_US_Monthly_Budget_Statement_December_body_Picture_1.png, U.S. Posts $86 Billion December Budget Deficit; USD/CAD Gains

Charts created using Strategy Trader– Prepared by Trang Nguyen

Market participants showed mixed reactions regarding to the greenback following the monthly budget statement. As can be seen from the one-minute USDCAD chart above, the currency pair hiked about 15 pips from 1.0181 to 1.0196. The Relative Strength Indicatortouches a 70-level indicated that market participants were massively buying the greenback while cutting their loonie holdings.

--- Written by Trang Nguyen, DailyFX Research Team for

To contact Trang, email

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.