We’re hearing about it all the time these days – the U.S. trade deficit widened in 2018 to a 10-year high, with the goods gap with China jumping to a record high despite tariffs on USD 250 billion worth of Chinese imports – all while the U.S. economy reached a level of growth it hadn’t seen since before the Great Recession.
President Trump sent out a tweet late Friday afternoon announcing that he would delay the next round of tariffs against China that had been set to go in effect on March 2nd. He expressed optimism that the trade talks would yield a resolution on the many structural issues at stake, culminating with a summit at Mar-a-Lago between President Xi and himself to conclude an agreement.
How is that possible? As history has shown us, global economic uncertainty leads to global investors shifting their money to safer U.S. assets which drives up the value of the dollar since dollars are needed (think supply vs demand) to purchase these assets. This is depicted by the U.S. Dollar Index (DXY), which tracks the strength of the dollar against a basket of major currencies. The dollar has held its strength and reamined near the peak its 52-week high. U.S. Dollar Index goes up when the U.S. dollar gains "strength" (value), compared to other currencies. In particular, it has gained 7% against the Euro since it began its ascent last April, and nearly 10% against the Chinese Yuan over the same period.
According to William Dudley, President of the New York Fed, the central bank may begin shrinking its balance sheet to get closer to normal levels as early as this year.
US stocks saw mixed results Thursday as a combination of the uncertainty surrounding the healthcare debate weighed on overall performance of the sector, and a downgrade of Biogen by Morgan Stanley and Leerink sent the stock tanking 5.1%. Several different sectors dropped into the red throughout the day, with healthcare leading the ray, touching 1% in the red at different times.
Private sector job growth severely beat estimates, sending the dollar higher against its international counterparts as the stronger the economy is (with job growth being a leading indicator), the more likely the US Federal Reserve is to continue raising the federal funds interest rate.
Wal-Mart lead the way as its share provided the biggest boost to the Dow, increasing over 3% after the company exceeded expectations with its quarterly earnings report.
The first month of 2017 is over, and key factors in judging the health of the economy are trending in a positive direction. US Factory output has officially surpassed a two year monthly high in January amid sustained gains in new orders and raw materials costs, indicating domestic demand is on the rise.
The US dollar is on track for a bad month as President Trump expressed his opinion on other countries devaluing their currencies – with his trade adviser specifically attacking the euro.
According to the US Bureau of Labor Statistics, job gains slowed down a bit in December to 156,000, and the jobless rate is approaching 4.7% here in America. Many analysts and economists all over the world are now forecasting growth to decrease as the economy is beyond the natural rate of unemployment (which the federal
© Dynamic Capital
