US goods trade deficit unexpectedly widens in September
The widening of the US goods trade deficit in September, driven by rising imports, adds another layer of complexity to the economic landscape as we approach Q4. This development suggests trade may once again hinder growth, contrary to expectations of a rebound. With US economic resilience being closely analyzed, the implications for USD sentiment are significant, especially as markets gauge the Fed's subsequent moves in light of this data.
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). The current trade deficit figures could prompt a reassessment of growth outlooks, impacting these positions. Firms such as JPMorgan and ING are aligned with a more optimistic view, reflecting a potential for USD strength despite the deficit.
How firms align
Goldman Sachs maintains a bullish target of 1.12, citing expectations of USD strength in light of data like this. Conversely, BofA's stance remains bearish with a target of 1.04, reflecting skepticism about growth sustainability. This contrasting view positions BofA at odds with the overall direction indicated by the headline.
What the data shows
Recent revisions suggest a cautious outlook on US growth and trade, something we've flagged in previous insights. Our analysis indicates a risk of further widening of the goods trade deficit affecting upcoming forecasts and USD positioning. See more in /research/[slug].
How firms align with this view
Aligned with the headline view
Contrary positioning
Key takeaways
- 01US goods trade deficit widens, signaling potential growth concerns for Q3.
- 02FX traders should monitor USD positioning amid these trade data updates.
- 03Watch for USD reactions as we approach the Fed's next meeting, key level at 1.075.
- 04Further widening of the deficit could drive USD volatility.
Market implications
Next week, focus on the Fed meeting, as trade data could shift sentiment and affect USD positioning. A breach below 1.075 in EUR/USD could register as a bearish signal, while holding above might prompt short-covering rallies.
Risks to this view
A clearer reversal would occur if US economic data shows unexpected strength, potentially leading to a stronger USD against our current positioning. Negative surprises in consumer spending could also reshape perceptions about growth sustainability.
Sentiment by currency
USD EUR~JPY~GBP~Composite USD score: -0.35
Sources & References
How we cover this story