Improvement in US Current Account Seen as Dollar Positive - Citi
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Citigroup forex strategist Bryan Zarnett noted the improvement in the US current account deficit will be something to watch as a slow moving USD positive.
Zarnett notes: The US current account deficit came in at $81.1B, which was better than the expected deficit of $88.0B, and represents about 1.9% of GDP. The BoP data are quarterly so the number means that the US has a financing requirement of about USD27bn per month. The TIC data earlier this week showed some reluctance by foreigners to invest in the US, but today’s data show a diminishing need for financing as well.
All major components of the US current account have been moving to shrink the deficit. The goods and service balance is improving largely because of goods (largely energy) but services are all showing a steady improvement. The net income balance is more volatile but also trending upwards.
It has been a long time since we paid attention to the current account. Swings in capital flows are more dramatic and dominate as quarter to quarter USD drivers, but cumulatively we are seeing a significant decline in US financing needs.
Overall, reduction in the current account deficit and the Fed's backing away from the Treasury bond market may end up as slow moving USD positive, the strategist said. "Today, the FOMC will dominate, but it is worth paying attention to these long-term trends," he tells clients.
Zarnett notes: The US current account deficit came in at $81.1B, which was better than the expected deficit of $88.0B, and represents about 1.9% of GDP. The BoP data are quarterly so the number means that the US has a financing requirement of about USD27bn per month. The TIC data earlier this week showed some reluctance by foreigners to invest in the US, but today’s data show a diminishing need for financing as well.
All major components of the US current account have been moving to shrink the deficit. The goods and service balance is improving largely because of goods (largely energy) but services are all showing a steady improvement. The net income balance is more volatile but also trending upwards.
It has been a long time since we paid attention to the current account. Swings in capital flows are more dramatic and dominate as quarter to quarter USD drivers, but cumulatively we are seeing a significant decline in US financing needs.
Overall, reduction in the current account deficit and the Fed's backing away from the Treasury bond market may end up as slow moving USD positive, the strategist said. "Today, the FOMC will dominate, but it is worth paying attention to these long-term trends," he tells clients.
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