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Euro area current account surplus contracts in Q3, net capital outflows likely to ease further in months ahead

Current account surplus in the euro area contracted in September after a marked decline recorded at the beginning of the third quarter. The latest data showed that the balance of payments narrowed further in September, falling EUR 7.3 billon to EUR 16.9 billion, its lowest level since the beginning of 2017. In line with softening net exports in the national accounts in recent quarters, the deterioration was mainly due to a fall in goods trade to a more-than four-year low, while the services trade and primary income balances also narrowed, with the former at its lowest for 14 months.

Therefore, for the third quarter as a whole, the euro area’s current account surplus shrank again to EUR 60.9 billion, from the average of EUR 100 billion in the initial two quarters of the year. On the financial front, the data underlined that net capital outflows continued at a slower rate, Having risen in 2016, when ECB net asset purchases were at the highest pace, net outflows have been on a downward trajectory, especially in debt securities, where cumulatively in the twelve months to September they declined to the lowest level since late 2015, noted Daiwa Capital Market Research in a report.

“Given that the ECB's asset purchases are due to conclude at the end of the year, net capital outflows are likely to ease further over the coming months and quarters”, added Daiwa Capital Market Research.

At 17:00 GMT the FxWirePro's Hourly Strength Index of Euro was slightly bullish at 66.6497, while the FxWirePro's Hourly Strength Index of US Dollar was neutral at -33.1133. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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