US Trade Deficit
The widening of the US Trade Deficit is becoming worrying and the figure came out at U$48.5bn in Jan compared to the previous figure of U$44.3bn. Although some might see this as a sign of stronger demand of the US consumers, other would prefer to look deeper into the details.
It has also made the Commerce Secretary Wilbur Ross to make a statement that highlights the importance and need of the US government to work on the trade agreements and enforcement so as “to correct this imbalance”. It is worth noting also that the trade deficit with China has widened to U$3.3bn in the month compared to the previous figure of U$27.8bn.
China FX Reserves
China released FX reserves for Feb and it showed an unexpected figure just above the U$3trn level. PBoC official Zhou said that China will not “allow radical fluctuation of yuan rate”. We can expect USD to Asian currencies to be range bound and maybe slightly volatile as we approach Friday where the NFP report is going to be released and also before Yellen’s rate decision next week.
US Dollar Index
We have a mixed bag for the DXY and Trump’s lack of clarity on his fiscal plan is also not helping much.
Mostly range bound and we on the most part would look to sell on rallies.
Downside risk prevails for the GBPUSD and the pair traded below 1.22 after the House of Lord’s vote to pass an amendment to Article-50 Bill which guarantees a parliamentary vote on the outcome of the negotiations.
Bearish momentum on the charts remains intact and the Brexit journey has barely begun.
1.20 to 1.24 is the range that we will be observing closely.
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