US Dollar Unruffled As US Trade Deficit in Goods Widens Unexpectedly

Talking Points

- The US advance goods trade balance rose unexpectedly to a four-month high in October.

- The deficit had been expected to widen to $59.7 billion.

- The data are unlikely to impact the strong US Dollar.

The US trade deficit rose unexpectedly to a four-month high in October, but the data wasn’t deemed damning enough to dent the dominance of the US Dollar.Friday’s US advance goods trade balance rose +9.6% $62.0 billion in October, up from $56.5 billion in September.

That’s a bigger jump than the $58.0 billion dollar expected by economists polled by Bloomberg News, and the largest monthly deficit since June, and put down in part to the continued reversal in the summer’s big rise in soybean exports. Exports in October were $122.1 billion, $3.4 billion less than in September. Imports in the month totaled $184.1 billion, $2.1 billion more than the previous month. This points to net external trade potentially impacting US fourth-quarter GDP growth in Q4’16.

Chart 1: US Dollar Index (DXY) (July 2016 to November 2016).

The Greenback has slid slightly today after nearly hitting a 14-month high yesterday, as price action is proving to be a bit flat amid thin, post-Thanksgiving conditions. Nevertheless, the US Dollar (via DXY Index) has still gained +3.72% since the victory of President-Elect Donald Trump, so only highly disappointing advance goods trade balance data had any chance of putting the strong Dollar off course.

Other more significant data of late, such as the October US Durable Goods report, which posted their biggest jump in a year, have beaten estimates, and the odds of a rate hike next month by the Federal Reserve have increased from 51% on November 8 to 100% today.

Read more: Euro at Risk from Brexit and Trump Fallout, Warns European Central Bank

--- Written by Oliver Morrison, Analyst

To contact Oliver, email him at oliver.morrison@ig.com