Trade figures dampen dollar

Hopes of a renewed lease of life for the dollar rally foundered yesterday when the US failed to deliver the improvement in the trade deficit that the markets had been expecting, writes Paul Wallace.

On a day of consolidation, the dollar stood at Y97.97 and DM1.4777 at the London close, virtually unchanged from Wednesday.

The dollar's principal gains were made against the pound, as sterling fell back on market expectations that interest rates in the UK had peaked after weaker-than-expected inflation figures.

For the third month running, the US trade deficit exceeded $11bn. The market had been expecting a deficit of $10.6bn, but the June trade gap turned out to be $11.3bn. However, the May figure, which had initially been estimated at $11.4bn, was revised down to $11.1bn.

The increase in the deficit was because of a larger decline in exports than in imports. Exports fell by 1.2 per cent on the month, while imports fell by 0.6 per cent.

Over the six months between January and June, compared with the same period in 1994, the overall deficit has increased by 28 per cent to $64bn. The principal reason for the deterioration has been the bilateral deficit with Mexico. This accounts for about 70 per cent of the worsening in the overall deficit.

The collapse in economic activity in Mexico - it fell by more than 10 per cent in the second quarter of the year - has wrought havoc with US trade. In the first half of 1994, the US ran a surplus of $1.1bn. This has now turned around to a deficit of $8.6bn.

There was an increase of 6 per cent in the politically sensitive trade deficit with Japan. However, David Bloom, economist at James Capel, said that Japanese data, which is in advance of data from the US, pointed to a large improvement in the bilateral deficit in July.

"We believe the bounce back in the US economy coupled with concerted action to prop up the dollar makes it unlikely that the Fed will move at the FOMC meeting on 22 August," Mr Bloom said.

Support for this view came from a stronger-than-expected indication of business activity in the Philadelphia Fed Index for August. The overall index rose from -23.7 in July to 4.4, compared with a market forecast of -12.4.

Initial jobless claims in the US were much in line with what the markets had been expecting.

Jobless claims in the US rose by 6,000 in the week ending 12 August to reach 338,000. The four-week moving average was 341,000, which the US Labour Department described as being the lowest level of claims since March.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back
Thurston Moore interview

Thurston Moore interview

On living in London, Sonic Youth and musical memoirs
In full bloom

In full bloom

Floral print womenswear
From leading man to Elephant Man, Bradley Cooper is terrific

From leading man to Elephant Man

Bradley Cooper is terrific