Oil and USD stabilized, but related economic adjustments are ongoing

For many of the EM oil importers, structural headwinds likely played a role (including the need to reduce oil subsidies), while in the US it may have been related to the extreme weather and the other adverse effects that weighed on Q1 activity more generally.

This might not reflect a permanent behavioural change by US consumers and expect lower energy prices to continue supporting consumption in the US and elsewhere.

Similarly, the USD appreciation has taken a break, but the trade-weighted USD remains 10-15% stronger compared to mid-2014. 

This continues to support net export contributions in Europe and Japan. 

Notably, China has also shown robust export performance despite keeping its currency stable against USD. Strong exports together with lower oil import bills are contributing to rising C/A surpluses in Europe, Japan and China, while the C/A surpluses in oil-exporting countries are shrinking rapidly and the US deficit is widening again (modestly).