All trading involves risk. Losses can exceed deposits.

Dollar weakens despite narrowing US deficit

The US Treasury budget for October shows rising revenue helping to reduce the deficit, but the report hasn’t halted today’s decline in the US dollar.

All trading involves risk. Losses can exceed deposits.

Employment growth helped lift revenue for the US Treasury Department last month, while the effects of sequestration meant spending was kept well reined in.

This meant that the deficit reduced in the first month of the US government’s new fiscal year, shortening to -$91.6 billion versus the -$120 billion seen in October 2012.

Receipts increased by around 8% from the year-ago amount, with outlays declining 4.5%, although the partial government shutdown may have contributed to a temporary reduction here. The $199 billion of revenue is the largest on record for October.

The median forecast of economists polled by Bloomberg was for a deficit of $102 billion.

The budget deficit of $680.3 billion for the fiscal year just gone was a five-year low, the first time the deficit had come in smaller than $1 trillion in those five years, and today’s report shows that the country’s finances continue to show improvement. Last year’s deficit represented 4.1% of US GDP, however, which remains quite high historically. Lawmakers in Washington are yet to agree on spending levels for 2014, with a temporary spending bill in place until 15 January.

By mid-afternoon in New York, EUR/USD was up 0.19%, GBP/USD had risen 0.75% and the dollar index, a measure of the dollar’s strength against a basket of six major currencies, was down 0.32%.

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.