US Current Account Deficit Narrows to Lowest Level in Two Years

The dollar index rose to 97.60 versus a bouquet of currencies Friday, near to levels never seen since early June as investors are worried about a second wave of Covid-19 infections and varied economic data unveiled during the week, including discouraging unemployment claims data. For the week, the dollar gained 0.5%.

In the first-quarter, the US current account deficit narrowed by $0.10 billion to $104.20 billion and missed economists’ expectations anticipations of a $103 billion deficit.

It is the lowest deficit since Q2 2018, partly due to the effect of Covid-19 as several companies were functioning at restricted capacity or ended operations totally, and the movement of tourists across borders was limited.

Exports of goods fell $8.40 billion to $403 billion, mainly led by civilian aircraft, collectibles and jewelry. Imports of goods decreased $18.60 billion to $595.30 billion, primarily cell phones computers and telecom machinery.

Both exports and imports of services fell due to travel, mainly other personal tour, and transport, basically air passenger transit.

Therefore, the goods and services deficit contracted to $119.10 billion from $129.80 billion. Additionally, the primary income surplus dwindled to $52.50 billion, from $62 billion and the secondary income difference widened to $37.60 billion, from $36.50 billion.

The US economic rebound from the Covid-19 pandemic is expected to be a tough job involving a lot of time and work, according to Fed Chairman Jerome Powell. While speaking on a video conference arranged by the Federal Reserve Bank of Cleveland on June 19, Powell stated that the negative impact of coronavirus outbreak has multiplied the level of misery and it has brought to limelight a wide array of disparities.

The Federal Reserve left the target band for federal funds rate unaltered at 0%-0.25% ten days back, as anticipated.

In Canada, retail sales slumped 26.4% m-o-m in April, after declining 10% in March, greater than market anticipations of a 15.1% decrease.

It was the biggest downturn ever posted, as non-essential vendors remained shut down. Clothing & accessories posted the largest decline of 84.8%, while sporting goods, book & music, and hobby posted at 66.7% drop.

On an optimistic note, several vendors established on increased their online existence and footway pick-up facilities in response to the shutdowns, with retail e-commerce increasing 56%. On yearly basis, retail sales plunged 32.5% the highest on record, after a 8.3% decline in March.

Spot gold changed hands at $1,743 per ounce Friday, near to levels never seen since the beginning of June, as investors looked for cover in the form of safe haven assets mainly due to sharp rise in Covid-19 cases in the US, Japan and China. On a weekly basis, the yellow metal gained 0.7%.

Brent crude futures ended Friday’s trading session at $42.12 per barrel, after hitting a high of $42.92 a barrel, the highest level since June 8th, against the back drop of confidence that worldwide oil demand is rebounding in spite of a surge in fresh Covid-19 infections and new releases indicating that Apple would once again shutdown some shops in the US.

The US WTI crude futures increased 2.3% to close at $39.75 a barrel, recording a 9.6% weekly appreciation and reflecting the seventh gain in eight weeks. Crude prices also got a boost from OPEC+ commitment to slash production, with Kazakhstan and Iraq expressing its preparedness to redress for excess production in May. On a weekly basis, Brent crude futures increased 8.2%.