THE TAKEAWAY:The U.S. Government Posted $124.436B Budget Deficit in May> Monthly Receipts Tumbled while Outlays Surged> USD Remains Weak vs. its Major Peers

The U.S. Government’s budget returns to deficit in May after posting a single monthly surplus in April, keeping this year’s imbalance on track to more than $1 trillion for a fourth straight year in a row.

The Monthly Treasury Statement issued today showed that the Federal Government posted $124.636 billion deficit in May. The figure is contrast to $59.117 billion surplus in April, first monthly budget surplus since September 2008. Last month’s print is close to consensus forecast of $125 billion from the Bloomberg News survey. Estimates of the May budget gap ranged from $130 billion to $30 billion.

The gap between spending and revenue substantially widened last month as a result of rising outlays and falling receipts. May outlays rose to $305.348 billion from $359.69 billion in the previous month, mostly attributable to increased spending for Medicare, Social Security and defense program. Meanwhile, the receipts declined to $180.713 billion from $318.807 billion in April.

In the first eight months of the fiscal year that began in October, the budget deficit totaled $844,494 billion, or 8.9 percent below a $927,455 imbalance in the same period last year. Regardless, the government deficit remains on track to more than $1 trillion for the fourth consecutive year. Inevitably, curbing budget deficit will be the central issue of this year’s presidential election.

EURUSD 1-minute Chart: June 12, 2012

061212_US_Monthly_Budgetary_Statement_May_body_Picture_1.png, USD Remains Weak after U.S. Government's Budget Returns to Deficit in May

Chart created using Strategy Trader – Prepared by Trang Nguyen

Market participants showed indecisive reactions regarding to the reserve currency following the Monthly Budget Statement release. As can be seen from the one-minute EURUSD chart above, the currency pair dropped approximately 15 pips from $1.2500 to 1.2485 after fifteen minutes, but then quickly saw correction to the same level before the report. At the time this report was written, the greenback stills tumble versus most of its major peers except its Japanese trading partners.

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

To contact Trang, email