Market Overview

What’s good in the record US trade deficit?

The US trade deficit continues to widen. Preliminary merchandise trade figures for March show a record excess of imports over exports of 90.6 billion.

By the level of March 2020, imports increased by 20% or $39 billion. During the same period, exports have added only 11.5% or $14.6 billion. That is to say, apart from the higher initial level, imports are also added at a considerably higher pace.

This is significant pressure on the dollar, diverting capital flows away from the USD, which is increasingly becoming the purchasing currency. Higher US borrowings by the government and business compensate for this constant outflow. Without their surge over the past year, the pressure on the dollar would be even greater.

This could well be the case when investors demand higher yields from dollar-denominated securities, fearing inflation.

On the bright side, the widening US trade deficit is often accompanied by the accelerated growth of emerging market economies and markets. From this perspective, markets and global economic growth is far from a turning point.

The FxPro Analyst Team

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