Employment, Inflation and Trade Data Leave Dollar Vulnerable
US headline PPI came in somewhat higher than expected at 0.4%. Weekly initial jobless claims were a bit stronger than expected and the US trade deficit was wider than expected. The trade balance, adjusted for inflation, is used to calculate GDP and there was a sharp widening of this deficit measure, which warns that, if anything, economists may have to revise Q3 GDP forecast down. The real deficit widened to $51.2 bln from $47.3 bln and an average of $47.9 bln in Q2. The wider trade deficit is not due to the stalling of exports. US exports hit a 2-year high. This includes the $1.7 bln slump in US commercial aircraft exports. Core PPI was tame with a 0.1% increase and is unlikely to stand in the way of new round of asset purchases.
The dollar remains vulnerable, but is over-extended after the overnight slide and players are more inclined to sell a bounce than chase it now.