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US Dollar Remains Weak on Widened Trade Deficit

The greenback remains bearish against its rivals, despite the successful tax overhaul in the US. In particular, the US dollar is weak against the yen. The strong consumer spending and better-than-expected inflation rate in Japan aided the strengthening of the yen. The US dollar was weakened by concerns about future rate hikes and weak inflationary pressure. The bearish trend is likely to continue due to a series of weak economic data reported yesterday.

The US Department of Labor reported unemployment claims of 245,000 in the week ended December 23, against analysts’ expectations of 240,000. The reported figures were unchanged from the previous week. The monthly moving average was $237,750, up 1,750 from the previous week’s unrevised average of 236,000. While the claims taking process has not returned to normal in Puerto Rico and Virgin Islands.

On the economic front, the Commerce Department reported a trade deficit that widened to $69.7 billion in November, from $68.1 billion in the previous month. Economists had expected a trade deficit of $67.7 billion. While exports increased by a seasonally adjusted rate of 3%, imports grew 2.7%.

Later that day, the US Census Bureau reported a 0.7% m-o-m increase in wholesale inventories to $610.7 billion for November. In October, the wholesale inventories declined 0.5%. Analysts expected a 0.4% increase in the wholesale inventories. When compared to November 2016, the wholesale inventories were up by 3.8%. Retail inventories at the end of November was $619.1 billion, up 0.1% from October 2017. Retail inventories increased 1.9% compared to the same period last year. While the inventories increased in November, the consumer confidence decreased in December.

According to the Conference Board, the consumer confidence index is expected to fall to 122.1 this month, after reaching a 17-year high of 128.6 last month. The level of optimism is the highest since 2000. Still, it was below analysts expectation of 128.2.

The soft employment data and a decline in consumer confidence is expected to keep the Greenback weak for the rest of this year.

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