U.S. current account deficit likely to have widened in Q4 2017

The U.S. current account deficit had narrowed in the third quarter of 2017 to a three-year low of USD 100.6 billion from the prior quarter’s USD 124.4 billion. This was mainly because of higher income payments on foreign assets and a narrower trade deficit in goods and services.

The third quarter financial account, the counterpart to the current account in the balance of payments, also indicated strong foreign direct investment of over USD 95 billion for the quarter. Foreign demand for treasuries stayed solid in the third quarter, although it has since decelerated, and foreigners became net sellers of Treasuries to end 2017.

“We look for the current account deficit to widen to $129.0 billion in Q4, mainly due to a larger trade deficit, as trade in goods and services makes up most of the current account”, noted Wells Fargo in a research report.

In the fourth quarter, trade deficit had risen to USD 652.2 billion and is expected to further widen in 2018. The U.S. dollar is expected to depreciate against most major currencies in the coming year, with some of this weakness coming from a wider current account deficit, added Wells Fargo.

At 21:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 72.7231. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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