24 Mar 2014
Better prospect for the USD - BAML
FXStreet (Barcelona) - Emanuella Enenajor, Canada and US Economist at Bank of America Merrill Lynch, sees better outlook for the greenback.
Key Quotes
"The current account deficit has shrunk in recent years, falling to only 1.9% of GDP in 4Q13 from the around 6% peak share seen prior to the crisis and 3% just a few years ago. The recent improvement has been driven two key factors: surging services exports and petroleum (goods) trade."
"On the services side, tourism has been a key driver, with foreign demand for US dollars rising on increased inbound tourism. This trend could continue with the rise in emerging market per capita income. As for the petroleum trade story, the US energy boom has led to both a substantial increase in petroleum product exports, and declining imports of crude oil."
"Looking ahead, our strategists expect continued gains in US energy production to put upward pressure on the dollar. Indeed, we expect the current account to continue to narrow this year, consistent with a slimming petroleum trade deficit and an increased services surplus."
"However, the news is not all positive. Ex-energy goods trade has continued to fall further into deficit."
"And we see risks that the trend could continue, particularly if a rise in the USD lifts relative unit labor costs in the factory sector, eroding manufacturing competitiveness. In other words, the US could suffer a mild version of the "Dutch Disease"."
Key Quotes
"The current account deficit has shrunk in recent years, falling to only 1.9% of GDP in 4Q13 from the around 6% peak share seen prior to the crisis and 3% just a few years ago. The recent improvement has been driven two key factors: surging services exports and petroleum (goods) trade."
"On the services side, tourism has been a key driver, with foreign demand for US dollars rising on increased inbound tourism. This trend could continue with the rise in emerging market per capita income. As for the petroleum trade story, the US energy boom has led to both a substantial increase in petroleum product exports, and declining imports of crude oil."
"Looking ahead, our strategists expect continued gains in US energy production to put upward pressure on the dollar. Indeed, we expect the current account to continue to narrow this year, consistent with a slimming petroleum trade deficit and an increased services surplus."
"However, the news is not all positive. Ex-energy goods trade has continued to fall further into deficit."
"And we see risks that the trend could continue, particularly if a rise in the USD lifts relative unit labor costs in the factory sector, eroding manufacturing competitiveness. In other words, the US could suffer a mild version of the "Dutch Disease"."