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U.S. Trade Balance and Consumer Sentiment Provide Hope

Last updated 12/9/2011 10:20 AM ET (GMT -5) 1 Comments

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Boris Schlossberg

Director of Currency Research, GFT

U.S. trade balance printed in line with forecasts showing a deficit of $43.5 billion for the month of October.  The gap shrank 1.6 percent from $44.2 billion in September.  U.S. consumer sentiment rose to its highest level in six months in early December according to the University of Michigan’s preliminary reading.   Confidence printed better-than-expected and climbed for a fourth straight month to 67.7.  This compared with 64.1 in November and a low of 55.7 back in August.

Purchases from overseas fell to the lowest level since April, due almost entirely to a plunge in demand for oil.  Imports of capital and consumer goods climbed, showing spending by American companies and households is keeping the economy growing.  Exports to China and South and Central America reached records, indicating demand from developing nations that is benefiting American companies.   U.S. exports should remain well supported as there is resilience in demand even in the face of uncertainty in Europe.  Consumer sentiment received a boost from more positive stories about recent economic developments.  Net job growth has been increasing in each of the past three months, as well as assessments of current conditions in the economy.  Measures of consumers’ current and future assessment of economic and financial conditions also rose to their highest levels since June.

DuPont cut its 2011 guidance as demand softened.  The company sees slower growth in certain segments during the fourth quarter, driven by global economic uncertainty.  This uncertainty is contributing to ongoing conservative cash management in some supply chains, the company said.  The comments had a chilling effect on risk and reversed the earlier rally.

The good news from the trade balance and consumer sentiment numbers led to slight support in USD/JPY.   The pair had slid from 77.70 this morning to 77.60 and has recovered to the 77.66 area.  The price action for the rest of the day should remain depressed as uncertainty persists about the global economic recovery.

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Comments (1)

Gogolando

December 13, 2011 at 11:01 AM ET

43.5 billion is quite big, don't you think? I don't see how America can keep importing this way without devaluing the USD?

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About The Author

Boris Schlossberg began his Wall Street trading career more than 20 years ago at Drexel Burhnam Lambert. There, he traded nearly every type of financial product on the market in the U.S., from equities and options to stock index futures and foreign exchange. His innate ability to analyze market information and use it to trade has helped him become an industry-recognized, “go to” trading professional.

These days, whenever the markets move, many organizations turn to Schlossberg for his take on the situation. He is a weekly contributor to CNBC's Squawk Box and a regular commentator for Bloomberg radio and television. His daily currency research is widely quoted by Reuters, Dow Jones and Agence France Presse newswires and appears in numerous newspapers worldwide. Schlossberg has written for publications like SFO magazine, Active Trader and Technical Analysis of Stocks and Commodities. He is also the author of Technical Analysis of the Currency Market and the co-author of Millionaire Traders: How Everyday People Are Beating Wall Street at Its Own Game with Kathy Lien. He joined GFT in 2008.