Trade deficit hits $105.6 billion, widest since just before Trump tariffs enacted last year
The U.S. trade deficit has widened to $105.6 billion, reflecting a 13.7% surge from July, exceeding expectations. This significant increase indicates mounting external imbalance pressures that may limit opportunities for U.S. dollar strength in the mid-term. With the trade gap at its widest since the imposition of Trump-era tariffs, the market may need to reassess the dollar's trajectory amid these deteriorating fundamentals.
Where it sits in our coverage
Our consensus EUR/USD target sits at 1.075 (median across 8 firms), with Goldman at the upper bound (1.12) and BofA at the lower (1.04). CNBC's report aligns with this consensus framing, particularly as concerns about the trade deficit impact expectations for U.S. economic resilience.
How firms align
Goldman Sachs remains aligned with the broader market sentiment on the trade deficit's implications, maintaining a target of 1.10 for March 2026. On the other hand, BofA's bearish outlook reflects concerns over further widening of the trade deficit, with a lower target of 1.04 for the same tenor.
What the data shows
Revisions in recent research suggest that a persistent trade deficit could weaken dollar fundamentals and affect monetary policy expectations. For further insights, please see /research/trade-deficit-impact on our platform.
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01Wider-than-expected trade deficit could pressure USD through 2024.
- 02Watch for trader positioning around 1.075 as a pivotal level.
- 03Risk of dollar depreciation increases with sustained trade imbalance.
- 04Expect heightened volatility ahead of key economic data releases.
Market implications
Traders should focus on the 1.075 level for EUR/USD, as it could serve as a new pivot point amid ongoing trade concerns. Upcoming data releases on consumer sentiment and inflation could influence market dynamics significantly.
Risks to this view
Should the trade deficit narrow unexpectedly in the coming reports or if economic growth outperforms expectations, this could cause a reversal in the bearish outlook for the dollar.
Sentiment by currency
USD EUR~JPY~GBP~Composite USD score: -0.55
Sources & References
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