FxWirePro: Dollar surges as EXIMs accounts for widened US trade deficit

The US November advance trade in goods report showed a modest widening in the deficit to $65.3bn on the month, versus $61.9bn in October. The widening is more prominent when cpmpared against August ($59.0bn) and September ($56.0bn) data. The trade gap in the US increased to $42.6 billion in October of 2016, up $6.4 billion from a downwardly revised $36.2 billion in September. 

The exports of goods fell 1.0% m/m, with declines coming in a wide variety of categories including food and beverage (-3.0%), capital goods (-4.0%), automotive (-2.4%), and others (-8.5%).

Only industrial supplies and consumer goods posted gains. Goods imports rose by 1.2% in November, boosted by imports of food and beverages (+2.2%) and industrial supplies (5.3%).

Imports of capital goods (-0.2%) and consumer goods (-0.3%) were modestly weaker on the month after both categories recorded solid increases in October.

Sluggishness in imports of capital and consumer goods remains a concern to us, given their importance in informing the strength of both business investment spending and private consumption. We remain watchful for signs that trends in these categories are dissimilar with our outlook.

In addition, the deficit in goods has widened in the first two months of the quarter relative to that seen in Q3. Hence, dependent on the remaining December data and services balance, it appears net trade will again be a drag on growth in Q4.

On the last trading day of 2016, the USD seems to have been gaining momentum against EUR and GBP back again in recently lost rallies, the dollar claws back lost ground against the yen to stand at 116.77 yen after earlier touching 116.05. 

The dollar index, which tracks the greenback against a basket of six major rivals, slipped 0.3 pct to 102.40 (DXY), below its high of the year of 103.65 touched on Dec. 20, which was its highest level since January 2003. But it was still poised to gain 3.8 pct for the year.